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According to a recent report, the global AI chip market is projected to grow at 20% CAGR to reach $311.6 billion by 2029 from $123.16 billion in 2024. The growth in the market is driven by the increasing adoption of AI technologies and applications across various industries, including BFSI, healthcare, retail & e-commerce, and media & entertainment. One player benefiting from this growth is Broadcom (Nasdaq: AVGO) that recently announced its quarterly results.

Broadcom’s Financials

For the second quarter of the year, Broadcom’s revenues grew 20% to $15 billion, marginally ahead of the Street’s forecast of $14.99 billion. EPS of $1.58 was also ahead of the market’s forecast of $1.56. Its net income increased to $4.97 billion from $2.12 billion a year ago.

By segment, its semiconductor solutions business grew 17% to $8.4 billion and was better than the $8.34 billion analyst estimate. Within the segment, its AI revenue grew 46% to over $4.4 billion driven by the growing demand for AI networking by hyperscalers. The company expects growth in AI semiconductor revenue to accelerate to $5.1 billion in the current quarter. For the second quarter, its software business that includes VMware, grew 25% to $6.6 billion.

For the third quarter, Broadcom expects revenues of $15.8 billion, ahead of the $15.7 billion expected by analysts.

Broadcom’s AI Growth

Broadcom’s AI chip offerings have helped it become one of the top suppliers of custom data center chips and networking hardware for AI workloads. It is working with a few hyperscale customers including the likes of Alphabet, Microsoft, and AWS to design and manufacture their own data center chips, also known as AI accelerators. These chips can be customized to suit the hyperscaler’s specific needs and will help reduce their dependence on Nvidia. Three of these hyperscalers are looking to deploy 1 million accelerators each by 2027. For Broadcom, that translates to a $90 billion market opportunity.

Besides AI chips, the company is also strengthening its switch offerings. Earlier this month, it announced the release of Tomahawk 6 switch that represents the next generation 102.4 terabits per second switch capacity. Tomahawk 6 allows for clusters of more than 100,000 AI accelerators to be deployed in just two tiers instead of three. By flattening the AI cluster, Broadcom can offer lower latency, higher bandwidth, and lower power requirements that can deliver improved performance in training next-generation models.

The market is impressed with Broadcom’s performance. Its stock has climbed to all time high levels, and the company has joined the prestigious trillion-dollar club. Its stock is currently trading at $248.7 with a market capitalization of $1.2 trillion. It was trading at a 52-week low level of $128.50 in August last year, and has climbed to record highs of $265.43 soon after the results announcement earlier this month.

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