Broadcom predicts sales from AI will double, offsetting broader slowdown in tech spending

Broadcom, one of the world’s biggest chipmakers, predicted that sales tied to artificial intelligence (AI) are on track to double this year, helping offset a broader slowdown in technology spending.

Chip revenue from companies building out their AI capabilities could grow to US$1 billion per quarter, Chief Executive Officer Hock Tan said during a conference call Thursday that followed Broadcom’s quarterly earnings release. AI-related chip sales could be more than 20 per cent of the company’s total soon, he said.

The outlook suggests that Nvidia is not the only chip maker benefiting from the AI frenzy. Broadcom’s networking components help direct traffic between computers in giant data centres, and it makes custom chips for some of the biggest cloud computing providers. Those customers have been racing to add more capacity to handle demand for AI services – a trend that helped send Nvidia near the US$1 trillion valuation threshold this week.

Broadcom is still contending with an industry-wide slump in tech demand, and its overall sales growth has decelerated sharply since a pandemic-fuelled surge in recent years.

Revenue in the fiscal third quarter will be about US$8.85 billion, up 4.6 per cent from a year earlier, the company said in an earlier statement Thursday. Though that tops the analyst estimate of US$8.76 billion, it would represent Broadcom’s slowest growth in years.

Tan had warned analysts and investors that pandemic boom times would not last. The shortages of the past few years have given way to an inventory glut in some areas, prompting customers to put off new orders.

In touting Broadcom’s AI gains, Tan is using a now-common tactic for tech companies. But, like others, he has not yet matched the dramatic increase that his counterpart Jensen Huang at Nvidia is seeing. Broadcom may be growing in a weakening overall market, but Nvidia predicted a jump in sales of more than 60 per cent.