Broadcom (NASDAQ: AVGO) shares have pulled back about 20% from the highs they hit in December, which could be a huge gift to investors. The company has one of the biggest growth opportunities in the artificial intelligence (AI) infrastructure space, and it is just getting started.
Famed portfolio manager Cathie Wood recently predicted that AI infrastructure spending would rise from around $500 billion to $1.4 trillion in 2030. While that would be good news in and of itself for Broadcom, what stood out even more was her prediction of how that spending would get spread out. The growth of spending on networking components was predicted to outpace the growth of compute, while AI ASICs (application-specific integrated circuits) were forecast to take some meaningful market share away from graphics processing units (GPUs).
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If Wood’s prediction were to come to fruition, it would be a huge growth driver for Broadcom. The company is a leader in both networking components and ASIC technology.
Broadcom has a robust networking portfolio, consisting of components such as Ethernet switches, optical receivers, digital signal processors (DSPs), and network interface cards (NICs). These components are necessary to manage data flow and help transfer data and distribute AI workloads across servers. As AI chip clusters become increasingly larger and more complex, the importance and need for these components should grow.
While AI data center networking is a big opportunity, Broadcom has an even bigger one with custom AI chips. The company is at the forefront of helping customers create AI ASIC accelerators, which are custom, hardwired chips designed to handle specific tasks. While customers supply the designs, Broadcom provides the building blocks and intellectual property to turn these blueprints into physical chips. Meanwhile, its relationship with leading foundry Taiwan Semiconductor Manufacturing helps Broadcom procure the capacity to manufacture these chips at scale.
Broadcom helped Alphabet with its highly successful tensor processing units (TPUs), which are ramping up rapidly for both Alphabet’s own needs as well as for those of its top cloud computing customers. Anthropic recently placed a $21 billion TPU order with Broadcom to deploy the chips through Google Cloud.
Meanwhile, other customers are working to design their own custom AI ASICs, including Meta Platforms and OpenAI. Citigroup analysts recently projected that Broadcom’s AI revenue would climb fivefold over the next two years, from $20 billion to $100 billion.
