Broadcom Expands Custom AI Chip Work With OpenAI

Broadcom is currently developing OpenAI's third-generation custom AI accelerator, extending a partnership that began with the Jalapeno inference chip unveiled in June. On an earnings call on 2 September, CEO Hock Tan stated that Broadcom delivered Jalapeno during the quarter, pointing toward deployments of 1.3 gigawatts in 2027 and over 5 gigawatts in 2028. This schedule would establish OpenAI as the company's second-largest custom processor client behind Anthropic.

For the third quarter, Broadcom posted $16.7 billion in artificial intelligence semiconductor revenue, a 221% increase year-on-year, with custom processors representing 73% of that division. Free cash flow reached $13.66 billion. Looking ahead, CEO Hock Tan projected company AI revenue to reach $115 billion in fiscal 2027 and $230 billion in fiscal 2028.

Broadcom shares closed at $364.38 on Wednesday, reflecting a 13.74% decline over the past month as markets evaluated news that OpenAI is also collaborating with Samsung on next-generation hardware. The stock trades at 47 times trailing earnings and 19 times forward earnings. Wall Street consensus shows an average target price of $533.41, supported by 37 Buy ratings, 8 Strong Buy ratings, and 4 Hold recommendations.