Broadcom’s Strategic Position Strengthens as AI Chip Competition Intensifies

Broadcom US11135F1012

A significant upgrade from Wolfe Research on January 31 has cast a spotlight on Broadcom, with the firm assigning an "Outperform" rating and a $400 price target. This bullish sentiment is fueled by the expanding market for custom artificial intelligence semiconductors, where Broadcom is securing a formidable role through key partnerships and design wins.

Broadcom’s growth trajectory is being powered by an impressive and growing list of technology titans. Its collaboration with Google on Tensor Processing Unit (TPU) development is now viewed as creating substantial competition for Nvidia's dominant graphics processing units. Furthermore, the company has recently secured a multi-year supply agreement with OpenAI and confirmed a $10 billion order from Anthropic in December 2025.

The client roster reads as a who's who of the industry, including Google, Meta, and Amazon Web Services. Counterpoint Research reinforced this outlook in late January, projecting that Broadcom’s share of the market for AI server application-specific integrated circuits (ASICs) could reach 60% by 2027.

Google's Strategic Shift Alters the Competitive Landscape

Analysts at Wolfe Research identify a pivotal change in Google’s decision to offer its TPU technology to external customers. This move is seen as establishing a genuine alternative to Nvidia’s offerings, with Broadcom positioned as the primary beneficiary. The scale of this opportunity is underscored by projections of approximately 7 million TPU units being shipped by 2028.

The performance capability of this technology has been demonstrated internally. Google software engineer Gabriel Rasskin, part of the Gemini team, noted a strong preference for custom silicon when speed is critical, stating he would "100 percent use a Custom Chip" if resources were not a constraint. The Gemini-3 model was trained entirely on TPUs, showcasing the system's prowess.

Financial Performance and Forward Guidance

Broadcom’s financial results highlight the accelerating contribution of its AI segment. For the full 2025 fiscal year, the company posted record revenue of $63.9 billion, a 24% increase. Revenue from AI-related products alone reached $20 billion, surging 65% year-over-year.

Looking ahead, management has provided guidance for the first quarter of fiscal 2026, anticipating total revenue of $19.1 billion. Within this figure, the AI chip division is expected to contribute $8.2 billion, which would represent a doubling compared to the prior-year period. The company is scheduled to report its next quarterly results on March 4, 2026.

A Note of Caution Amid the Optimism

Despite the positive momentum, some analysts advise a measured perspective. Gil Luria of D.A. Davidson acknowledges that major cloud providers like Amazon, Google, Microsoft, and Meta seek to avoid dependency on a single supplier. However, he characterizes Broadcom’s position as more "fragile" than Nvidia’s, given its reliance on a concentrated group of large customers, with Google being particularly significant. Nvidia’s universally deployable GPUs are expected to maintain their relevance across a broader market.

The competitive dynamics in the AI hardware space are clearly evolving, with Broadcom emerging as a central player in the trend toward custom silicon solutions.