So Broadcom just casually dropped news about a $10 billion deal and the stock went absolutely bonkers – up 10% in a single day. Not bad for a Tuesday, right?
Here’s the tea: Broadcom (AVGO) isn’t exactly a household name like Apple or Tesla, but this chipmaker has been quietly crushing it in the AI space. While everyone’s been obsessing over Nvidia, Broadcom has been building custom AI chips for the big tech giants – and apparently, they just landed their biggest fish yet.
The Numbers Don’t Lie
Let’s talk about those Q3 earnings that sent the stock to the moon:
- Revenue jumped 22% to a record $15.95 billion (beating estimates)
- AI chip revenue surged 63% – now making up a third of total revenue
- Net income hit $4.1 billion (compared to a loss last year, but that was due to some tax shenanigans)
But here’s where it gets juicy. CEO Hock Tan mentioned they’ve got a new “fourth hyperscaler” customer who just committed to $10 billion worth of AI chip orders. That’s not pocket change, even for Silicon Valley.
Plot Twist: We Think It’s OpenAI
Broadcom won’t name names (because of course they won’t), but the smart money on Wall Street is betting it’s OpenAI. Think about it – OpenAI needs massive computing power for ChatGPT and their other AI models, and they’ve been burning through cash faster than a crypto bro in 2021.
The other three “hyperscaler” customers? That’s Meta, Google, and ByteDance (TikTok’s parent company). So OpenAI joining this exclusive club makes perfect sense.
Why This Actually Matters
This isn’t just another tech earnings beat. Broadcom is positioning itself as the “Magnificent 8th” stock – potentially joining the elite group of mega-cap tech darlings. With a market cap that puts it ahead of Tesla, maybe it’s time we started paying attention.
The company is forecasting AI chip revenue of $6.2 billion in Q4 (up 19% from Q3), and they’re basically printing money with a 67% EBITDA margin. Sure, the P/E ratio of 111 looks scary, but the forward P/E of 36 is more reasonable if you believe in the AI story.
The Bottom Line
While everyone’s been watching Nvidia’s every move, Broadcom has been quietly building the infrastructure that powers AI. They’re not competing with Nvidia – they’re complementing it, creating custom chips for specific customers who need something special.
Wall Street analysts are falling over themselves to raise price targets, with some calling for $400 per share (it’s currently around $334). Whether that happens or not, one thing’s clear: in the AI gold rush, Broadcom isn’t just selling shovels – they’re building the entire mining operation.
Just remember, past performance doesn’t guarantee future results, and always do your own research before making investment decisions. But hey, at least now you know why your tech-savvy friend won’t shut up about AVGO.