Broadcom jumps as upbeat forecast raises hopes of AI rally resurgence
Technology
Broadcom jumps as upbeat forecast raises hopes of AI rally resurgence
(Reuters) - Broadcom's shares soared 12% in premarket trading on Friday as the semiconductor maker's strong revenue forecast helped restore some confidence in AI chip demand after a bruising sector-wide selloff following rival Marvell Technology's bleak outlook.
The rosy forecast from Broadcom - the biggest supplier of custom AI chips to Big Tech - could help refuel a sputtering AI stock rally that has been hit by worries over hefty spending on AI infrastructure sparked by low-cost breakthroughs from Chinese startup DeepSeek.
"Given the anxiety about AI conditions in general, these (Broadcom) results should come as a relief," according to Morgan Stanley analysts.
Broadcom CEO Hock Tan said on Thursday the company expects AI chip revenue of $4.4 billion in the second quarter, underscoring the push from large cloud providers to reduce dependence on the costly processors designed by Nvidia.
Marvell's shares rose more than 1% on Friday, after they closed down 19.8% on Thursday, marking their worst day in more than two decades due to a disappointing in-line revenue forecast.
AI chip leader Nvidia and memory chipmaker Micron Technology's shares rose about 1.5% each on Friday.
Broadcom is set to add more than $91 billion to its market value if premarket gains hold, but would still be below the $1 trillion valuation threshold it had first crossed in December in what was dubbed as its "Nvidia moment".
"Perhaps the AI trade isn't as dead as feared ... but amid AI nervousness, (Broadcom) management's view of the future is becoming even more positive," Bernstein analysts said.
Broadcom's shares have fallen more than 20% so far this year, after doubling in 2024. The broader Philadelphia Semiconductor index is down about 10% so far in 2025, after gaining nearly 20% last year, as higher tariffs under U.S. President Donald Trump weigh on the sector.
Under Tan, Broadcom has also expanded its strategy of building a diverse portfolio of tech companies such as its $69-billion buyout of cloud-computing firm VMware.
"Broadcom is unique as a portion of their business comes from enterprise software," said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares of the chipmaker.
"This is a blessing when the chip sector goes through a downturn."
Broadcom's software revenue grew 47% in the first quarter to $6.70 billion, representing more than 40% of total sales.
The company has a 12-month forward price-to-earnings ratio of 26.58, compared with 23.46 for Nvidia and 24.50 for Marvell, according to data compiled by LSEG.
