Broadcom CEO sees excessive demand for AI chips. Earnings have been sturdy.

Hock Tan, CEO of Broadcom, says generative AI functions will increase demand for the corporate’s chips.

Chipmaker Broadcom (Inventory ticker: AVGO) made a higher-than-expected income forecast for the July quarter. Its shares additionally rose in after-hours buying and selling.

On Thursday, Broadcom (inventory image: AVGO) reported adjusted earnings per share for the fiscal second quarter of $10.32, beating the Wall Road consensus estimate of $10.12, in response to FactSet. Income was $8.73 billion, roughly in keeping with expectations of $8.7 billion.

Broadcom’s steerage was additionally above expectations. It supplied a income forecast of $8.85 billion for the fiscal third quarter, in comparison with the $8.72 billion anticipated by analysts.

“Our third-quarter outlook tasks year-over-year development, reflecting continued management within the networking house as we energy a calculated ramp into large-scale AI networks,” CEO Tan mentioned within the earnings launch.

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Shares of the chipmaker traded up 4.3% to $823.63 after the problem.

On the decision with analysts and traders, Tan mentioned Broadcom’s income path uncovered to generative AI is anticipated to double this fiscal yr for the reason that starting of the fiscal yr.

A few of Broadcom’s chipsets showcase generative AI techniques, which have been a well-liked funding matter this yr. Know-how ingests textual content, photographs, and movies in a brutal option to create content material. Curiosity on this type of AI started with OpenAI’s launch of ChatGPT late final yr.

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Broadcom semiconductors are present in quite a few classes, together with networking, broadband, server storage, wi-fi, and industrial networking. Because of the broad base nature of its finish markets, it may be seen as a benchmark for the remainder of the trade.

Earlier this week, KeyBanc Capital Markets analyst Jon Vinh raised his value goal for Broadcom inventory to $820 from $720, and maintained an chubby score, citing its lead in AI.

Broadcom shares are up 38% over the previous 12 months, in contrast with a 16% achieve for the iShares Semiconductor exchange-traded fund (SOXX), which tracks the efficiency of the ICE Semiconductor Index.

Write to Tae Kim at [email protected]