Broadcom Inc. (NASDAQ:AVGO) provided insights into the market for artificial intelligence (AI) infrastructure, suggesting that major cloud providers, known as hyperscalers, are looking for more comprehensive solutions than just high-powered Graphics Processing Units (GPUs) from NVIDIA.
Broadcom’s Financial Outlook for AI Chip Revenue
The custom AI chip manufacturer released updated revenue expectations. Broadcom now anticipates generating approximately $115 billion in AI chip revenue for the fiscal year concluding in October 2027. This figure represents an increase from its previous forecast of over $100 billion. Furthermore, the company projects that this revenue stream will double to roughly $230 billion in fiscal 2028.
Broadcom’s financial outlook indicates that the demand from tech giants extends beyond expensive processors. Instead, these companies are keenly interested in suppliers, such as Broadcom, that can provide both specialized custom chips and necessary networking components.
KeyBanc analyst John Vinh responded to the forecast by reiterating an Overweight rating on Broadcom and setting a price target of $575.00.
The Shift Toward Diverse AI Infrastructure Suppliers
Hyperscalers are increasingly seeking suppliers that offer a variety of processors, each designed for different specific workloads. This strategic shift allows the major technology firms to gain greater control over the economics of their AI infrastructure. This preference not only reduces their dependence on NVIDIA but also provides opportunities to lower operational costs and develop custom silicon solutions.
Broadcom President and CEO Hock Tan emphasized that the demand for both the company’s custom AI accelerators and its AI networking infrastructure continues to exceed available supply. During its Q3 fiscal 2026 earnings report, Tan highlighted exploding demand originating from major industry leaders, including OpenAI, Meta, Google, and Anthropic.
A note from Keybanc further pointed out that Anthropic and OpenAI could represent Broadcom’s largest customers in fiscal 2028, which potentially offers Broadcom Inc. (NASDAQ:AVGO) greater visibility beyond its existing relationship with Google. This trend underscores how essential custom chips are becoming within the broader AI infrastructure landscape.
Competition and Market Dynamics
Despite the strong demand, the segment is facing mounting competition. For instance, Alphabet’s Google recently expanded its partnership with Marvell, leading some analysts to suggest that Broadcom might be losing market share within Google’s Tensor Processing Unit (TPU) programs. While this new deal does not aim to displace Broadcom, it suggests that the company’s market position is not guaranteed.
On the operational side, Broadcom reported that its fiscal third-quarter revenue rose 86% year-over-year, reaching approximately $29.6 billion, thus surpassing Wall Street predictions. However, the company’s guidance for the fourth quarter, estimated at around $34.8 billion, fell slightly short of the $35 billion consensus estimate, which was noted as a mixed signal.
It is important to note that custom chips do not necessarily threaten NVIDIA’s dominance. The current market scenario suggests that hyperscalers are not abandoning NVIDIA; rather, they are integrating custom silicon alongside the GPUs. Reports indicate that NVIDIA maintains an 80% share of the GPU market. Furthermore, major players are deploying multiple technologies: Amazon Web Services (AWS) is using Trainium alongside millions of NVIDIA GPUs; Microsoft is scaling both NVIDIA Rubin and Maia; and Google is utilizing both TPUs and NVIDIA GPUs.
The specialized developer ecosystem, including NVIDIA’s CUDA software, along with the hardware performance, remains difficult for competitors to replicate. Nevertheless, hyperscalers also possess the scale necessary to justify spending on chips tailored for specific workloads, potentially diverting a significant portion of processing away from general-purpose, expensive GPUs.
Investor Analysis and Market Positioning
Analyzing hedge fund activity, data from Insider Monkey showed that 170 funds held positions in Broadcom at the close of the second quarter, a slight decrease from 173 funds in the prior quarter. In contrast, 285 funds held positions in NVIDIA at the end of the second quarter, representing an increase from 275 funds.
Institutional filings revealed that at the close of the second quarter, Fisher Asset Management held roughly 15.1 million shares of Broadcom and 90.9 million shares of NVIDIA. Additionally, AQR Capital Management increased its stake in Broadcom by 9% while simultaneously boosting its investment in NVIDIA by 18%.
Overall, Broadcom’s forecast suggests that demand for NVIDIA’s GPUs is not slowing down. Instead, it points to a growing preference among hyperscalers for utilizing both NVIDIA products and those from suppliers like Broadcom. If the expansion of AI infrastructure continues at an unprecedented pace, both companies are positioned to benefit.
