UPDATE: On October 13, 2023, Broadcom (AVGO) and OpenAI announced a groundbreaking partnership to deliver custom AI accelerators and Ethernet networking chips, boosting data center capacity by a staggering 10 gigawatts. This deal positions Broadcom as a formidable competitor to Nvidia (NVDA) in the rapidly expanding landscape of generative artificial intelligence.
Broadcom’s shares surged by 10% in intraday trading following the announcement, reflecting investor enthusiasm for the company’s strategic move. The deployment of these AI chips is slated to commence in the second half of 2026 and continue through 2029, marking a significant milestone in the tech industry’s ongoing evolution.
This partnership is particularly notable as it eclipses a recent agreement between OpenAI and Advanced Micro Devices (AMD) for 6 gigawatts of capacity. The scale of Broadcom’s deal underscores the explosive demand for generative AI infrastructure, a trend that is reshaping the tech landscape and creating immense opportunities for growth.
Broadcom’s collaboration with OpenAI marks the company’s fifth custom accelerator customer, following an unnamed fourth customer revealed in September. These partnerships are anticipated to drive a substantial revenue inflection in 2026 and 2027, further solidifying Broadcom’s position in the AI sector.
“We are excited about the immense growth potential this partnership brings,” stated a Broadcom spokesperson. “With AI revenue expected to double to $40 billion in fiscal 2026, we are poised for remarkable expansion.”
Analysts have responded positively, raising their fair value estimates for Broadcom to $365 per share, up from a previous estimate of $325. This revision reflects the anticipated boost in AI revenue as the company aims to secure a larger slice of the burgeoning AI market. Broadcom’s guidance suggests it will see $10 billion in new revenue in fiscal 2026 alone, hinting at even stronger growth trajectories ahead.
The implications of this deal are far-reaching. As existing customers are expected to increase orders of custom compute and networking chips, Broadcom is well-positioned to capitalize on the growing demand for advanced AI technologies. Furthermore, the company is likely to attract additional clients as AI model builders seek reliable partners to support their expanding needs.
Looking ahead, investors and industry watchers should keep a close eye on the developments surrounding Broadcom and OpenAI. With AI becoming a central focus in technology, this partnership not only promises to enhance Broadcom’s revenue streams but also signals a transformative shift in the tech industry landscape.
This urgent update on Broadcom’s strategic move highlights the company’s commitment to remain at the forefront of AI innovation. As the partnership unfolds, further announcements and developments are expected, making this a critical story to follow in the coming months.