Broadcom shares increased 7% following the announcement of a new $10 billion AI contract. CEO Hock Tan forecasts significant revenue growth for AI in 2026.
Major AI Deal
Broadcom announced securing over $10 billion in AI infrastructure orders from a new customer, strengthening the company's custom silicon strategy. CEO Hock Tan expects 'significantly' improved AI revenue growth in fiscal year 2026, with total projected ASIC revenue reaching $30 billion for that period. There is speculation that the new customer is OpenAI, which is working with Broadcom to develop custom AI chips.
Growth Prospects and Market Analysis
Broadcom has positioned itself as a key player in the AI market by designing custom semiconductors for cloud giants seeking alternatives to Nvidia's GPUs. Recently, the company raised its fiscal 2026 wafer allocation at TSMC from 120,000 to 150,000, representing 81% year-over-year growth. This new partnership marks the company’s fourth ASIC customer, adding to its already strong pipeline of custom silicon wins.
Financial Performance and Investor Reaction
Following the deal announcement, multiple investment banks raised their price targets for Broadcom, including Morgan Stanley, which increased it to $382. The company's stock has demonstrated impressive performance, increasing 102% over the past year. Currently, shareholders can expect strong financial metrics, including a 31.59% profit margin and 77.2% gross profit margins.
The announced deal and optimistic projections from Hock Tan signify Broadcom's growing influence in the AI market, leading to a positive response from investors and analysts.
