Broadcom (NASDAQ: AVGO) continues to pile up the wins. Last week, the company extended the contract with it Meta Platforms (NASDAQ: META) helping the social media giant develop new AI chips. The first commitment is for 1 gigawatt chips, and the deal will run through 2029. However, this is expected to be just the beginning of the multi-generation custom chip road. Given the scope of the deal, Broadcom CEO Hock Tan will also step down from Meta’s board and move into an advisory role to help the company with its custom roadmap.
Meta also unveiled four generations of custom MTIA (Meta Training and Inference Accelerator) chips, developed with the help of Broadcom, last month. MTIA 300 is already used for standard training and certification, while the upcoming MTIA 400, 450, again 500 it can handle all AI workloads but is specifically designed with it in mind.
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Earlier this month, Broadcom also extended its partnership with it Alphabets helping it develop future iterations of its most popular Tensor Processing Units (TPUs). The two then entered into an agreement to supply Anthropic with an additional 3.5 gigawatts worth of chips starting in 2027. Broadcom already has $21 billion in TPU orders from Anthropic this year.
Prior to these announcements, Broadcom had said it was on track to deliver $100 billion worth of custom AI chips to customers by fiscal year 2027. Given that the company had about $20 billion in AI revenue, including the network in fiscal 2025, and less than $64 billion in revenue, that’s an incredible number. Meanwhile, these extended agreements will keep growth coming for years to come.
Broadcom’s custom chip business also feeds directly into the data center networking business. The company is a major player in networking, where its Tomahawk Ethernet is a leading switching solution. As AI chip clusters grow, this business grows.
Hyperscalers (owners of large data centers) are increasingly looking for alternatives Nvidiahigh-end graphics processing units (GPUs). Custom AI chips are becoming one of the best options for pursuing hyperscalers, especially for speculation. Custom AI ASICs (application-specific integrated circuits) can offer both performance and cost benefits, as these hard-wired chips are purpose-built and more energy-efficient. Meanwhile, given Broadcom’s track record in the space, many companies are turning to it for help.
With Broadcom set to see explosive growth in the coming years, my prediction is that it’s not too late to buy the stock and that there is much more to come.
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Geoffrey Seiler holds positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions and recommends Alphabet, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a policy of disclosure.
Prediction: It’s Not Too Late to Buy Broadcom Stock After Another Company Win was first published by The Motley Fool.
