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Broadcom Raises Revenue Forecast on AI Chip Demand but Shares Dip

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Broadcom delivered a stronger-than-expected revenue forecast for its third quarter, supported by robust demand for its networking and custom AI computing chips. The company projected Q3 revenue of approximately $15.80 billion, exceeding analysts’ average estimate of $15.71 billion according to LSEG data.

Despite the upbeat forecast, Broadcom’s shares fell 4% in after-hours trading. The stock had already climbed nearly 30% over the past month and around 12% for the year, leading some investors to view the forecast as insufficiently exceeding high market expectations. “Clearly, expectations were high coming into the print,” said Kinngai Chan, senior research analyst at Summit Insights Group.

The Palo Alto-based company plays a crucial role in the AI hardware ecosystem, designing custom processors and networking chips for major AI and cloud computing clients such as OpenAI and Google. Broadcom has begun shipping its newest networking chip, the Tomahawk 6, which doubles the performance of its predecessor and enhances data center efficiency for AI workloads.

Broadcom CEO Hock Tan highlighted the ongoing growth, noting that AI semiconductor revenue is expected to accelerate to $5.1 billion in the third quarter, marking ten consecutive quarters of growth. “Our hyperscale partners continue to invest,” Tan stated. In contrast, non-AI semiconductor revenue remains sluggish and near the bottom of its cycle.

For the second quarter, Broadcom reported total revenue of $15 billion, narrowly surpassing analysts’ estimates of $14.99 billion. Revenue from its semiconductor segment, which includes products for data centers and networking, grew 16.7% year-over-year to $8.41 billion.

TSMC Proposes Joint Venture with Intel’s Foundry Division to Nvidia, AMD, and Broadcom

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TSMC (2330.TW) has pitched the idea of a joint venture involving Intel’s (INTC.O) foundry division to major U.S. chip designers, including Nvidia (NVDA.O), Advanced Micro Devices (AMD.O), and Broadcom (AVGO.O), according to sources familiar with the discussions. Under the proposal, TSMC, the world’s leading contract chipmaker, would oversee Intel’s foundry operations, which focus on manufacturing chips tailored to customer needs, but TSMC would retain no more than 50% ownership.

The proposal has been discussed with several other firms as well, including Qualcomm (QCOM.O), as part of TSMC’s efforts to partner with chip designers. The discussions are still in their early stages, and any potential deal would require approval from the U.S. government, particularly under the administration of President Donald Trump, who has shown interest in helping Intel recover from its financial struggles. Trump is particularly invested in boosting American manufacturing and supporting companies like Intel in remaining U.S.-owned.

Intel, which reported an $18.8 billion net loss for 2024, has seen a drastic decline in its stock price over the past year. As of December 31, the book value of Intel’s foundry division’s property and plant equipment stood at $108 billion. The company’s recent struggles have pushed its board members to consider various strategic moves, including partnering with TSMC for its foundry operations.

Despite some internal opposition, Intel’s board members have expressed support for exploring a joint venture with TSMC, with Intel’s executives holding different views on the matter. Intel’s foundry division, once a crucial part of Intel’s strategy under former CEO Pat Gelsinger, is now central to the company’s efforts to return to profitability, even as Gelsinger was replaced by interim co-CEOs in December.

TSMC’s push for a joint venture is complicated by the significant differences in manufacturing processes and technologies between the two companies. Intel and TSMC currently employ distinct chipmaking methods, which could pose challenges in aligning operations. Intel has previously partnered with Taiwan’s UMC (2303.TW) and Israel’s Tower Semiconductor (TSEM.TA), offering some precedent for potential collaboration, but the specifics of how such a partnership could function remain uncertain, especially regarding the sharing of trade secrets.

While TSMC’s interest is to involve Intel’s advanced manufacturing customers in the venture, discussions have also centered around Intel’s 18A manufacturing process, a key area of contention in the negotiations. Intel executives have claimed that its 18A technology surpasses TSMC’s 2-nanometer process, with Nvidia and Broadcom already testing Intel’s manufacturing capabilities, alongside AMD exploring the potential of Intel’s processes for its chips.

Marvell Shares Suffer Worst Day in 24 Years Amid Tepid AI Revenue Forecast

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Marvell Technology’s (MRVL.O) shares plunged by 19.8% on Thursday, marking their worst day in over two decades. The sharp decline follows a revenue forecast for the upcoming quarter that failed to meet investor expectations, reigniting concerns about cooling demand for AI infrastructure.

The stock closed at $72.28, reaching a four-month low of $71.65 earlier in the day. Investors had been looking to Marvell’s earnings, a key supplier of custom AI chips, for indications of sustained demand in the AI sector, which has driven significant market growth since the rise of ChatGPT in late 2022. However, Marvell’s forecast for the next quarter was only slightly above analyst expectations, falling short of the more substantial beat that investors were hoping for.

TD Cowen analyst Joshua Buchalter noted that investors were anticipating stronger revenue growth, given recent comments on capital expenditures from some of Marvell’s largest customers. With over 45 million shares traded, significantly more than the 50-day average of 14 million, the market responded nervously.

The decline in Marvell’s stock price also weighed on other chipmakers, including Broadcom, which saw its shares drop nearly 7%, and Nvidia, which slid by 5%. Marvell’s performance led to a $15 billion loss in market value, and its shares are down 18% this year after an 83% rise in 2024.

Marvell’s CEO, Matt Murphy, did highlight that the company had exceeded its fiscal 2025 AI revenue target and is optimistic about surpassing its projections for fiscal 2026. However, analysts attributed the weak forecast to a slowdown in demand for on-premise data center products, as Big Tech shifts spending towards AI chips, leaving Marvell’s core networking business, which focuses on ethernet cables and fiber channels, in a weaker position.

The semiconductor sector overall has faced pressure from tariffs imposed by the U.S. government, adding to investor concerns. Analysts from Melius Research noted that sentiment around AI semiconductor stocks is currently negative, and many brokerages have cut their price targets for Marvell following the results.