Broadcom's $45 Billion Ethernet Bet and Custom Chip Bonanza Redraw the AI Landscape

Broadcom's AI networking revenue could hit $45B by 2027 as Ethernet switch sales double, while custom chips for Meta and Apple lock in long-term growth.

Broadcom is waging a two-front campaign in the artificial intelligence hardware market, leveraging a rapid shift toward open networking standards in data centers while locking in multi-billion-dollar custom chip partnerships with Meta and Apple. The strategy has produced a torrent of fresh revenue forecasts and contract extensions, even as the stock trades nearly 19% below its June 2026 record high.

The most transformative force may be coming from Broadcom’s networking division. JPMorgan analyst Harlan Sur published a note on July 10 projecting that the company’s AI networking revenue could hit at least $45 billion by fiscal 2027, driven by the industry’s accelerating migration from proprietary interconnect systems to open Ethernet standards. In the first quarter of 2026 alone, sales of Ethernet switches used in AI back-end networks doubled year-over-year. Those switches now account for roughly two-thirds of all switch deployments inside AI clusters, a clear technical lead over closed, vendor-locked alternatives.

Broadcom’s Tomahawk and Jericho3-AI switch platforms sit at the heart of this transition. They allow hyperscale cloud operators to mix hardware from different suppliers — pairing Nvidia graphics processors with Google’s Tensor Processing Units, for example — without being tethered to a single vendor’s proprietary fabric. Mizuho analyst Vijay Rakesh calls the approach “scale-up Ethernet” and estimates it could eventually represent a quarter of Broadcom’s total network sales. Mizuho maintains an “Outperform” rating with a $530 price target, roughly €490.

At the same time, Broadcom is deepening its custom silicon pipeline. On July 9, the company confirmed that it has co-developed a specialized AI accelerator code-named “Iris” for Meta, with production slated to begin in September 2026 as part of a multi-year partnership for AI data center infrastructure. That announcement came just days after Broadcom extended its supply agreement with Apple through 2031 in a deal valued at more than €30 billion. Under that pact, Broadcom will deliver over 15 billion chips manufactured in the United States and is investing €1.5 billion in its Fort Collins, Colorado, facility to produce wireless components such as FBAR filters and custom ASICs for Apple’s AI servers. Apple represents roughly 20% of Broadcom’s annual revenue, making the long-term renewal a critical piece of planning visibility.

The financial results already reflect the momentum. In the second quarter of fiscal 2026, Broadcom generated €10.8 billion in AI semiconductor revenue — a 143% surge from the prior year — and logged an AI chip backlog of €30 billion. Total second-quarter revenue climbed to €22.19 billion, up 47.9% year-over-year, and management has guided for €29.4 billion in the third quarter.

Analyst sentiment, however, is divided. The Erste Group downgraded Broadcom from “Buy” to “Hold” on July 7, citing limited upside after the recent rally. JPMorgan and Evercore remain bullish, setting price targets between €530 and €582 and pointing to a PEG ratio of roughly 0.53, which suggests the stock is still reasonably valued relative to its expected earnings growth in the AI sector. Volatility remains elevated, with a 30-day annualized reading of 63.78%, while the 14-day relative strength index of 54.3 signals neither overbought nor oversold conditions.

On the trading desk, Broadcom shares edged down 0.74% on Friday to €348.35, a slight pullback from Thursday’s close of €350.95. The stock has gained 47.92% over the past twelve months and 17.43% year-to-date, but it remains 18.91% below its all-time high of €429.60 reached in early June. Technically, the share price sits just below its 50-day moving average of €350.71 and well above the 200-day average of €312.68, reinforcing the long-term uptrend even as the near-term path toward a new record remains clouded by the upcoming third-quarter earnings report — the moment that will either validate the €29.4 billion revenue forecast or raise fresh questions about the pace of Broadcom’s AI expansion.