Broadcom has made headlines with the announcement of a significant $10 billion chip deal with a new customer, stunning investors and the tech industry alike. This revelation comes on the heels of the rising demand for custom application-specific integrated circuits (ASICs), a key revenue driver for Broadcom, especially in the realm of artificial intelligence (AI).
While speculation initially swirled around the possibility that OpenAI might be the mystery customer, the company’s executives later dismissed these rumors. Instead, equity research analyst Vijay Rakesh from Mizuho has suggested that the unknown client could be Anthropic, a prominent competitor to OpenAI. This assertion may hold water, given the strategic implications of such a partnership.
Broadcom’s customer roster includes major players in the tech space, with firms like Meta Platforms, Alphabet, and ByteDance already utilizing its custom silicon solutions. Anthropic, which emerged shortly after the launch of ChatGPT in November 2022, has garnered significant investments from both Amazon and Alphabet to build its AI capabilities.
Anthropic has historically relied heavily on Amazon Web Services (AWS) for the training of its generative AI models, utilizing Amazon’s proprietary chips. However, the company’s recent moves indicate a diversification strategy similar to that of OpenAI, which has begun to explore partnerships beyond Microsoft, such as a deal with Google Cloud earlier this year.
As Anthropic navigates this evolving landscape, it stands to reason that it would seek additional compute resources to meet the growing complexity and demands of AI workloads. Given Broadcom’s existing relationships and capabilities, it seems plausible that Anthropic might turn to Broadcom for further support in its AI initiatives.
Looking at Broadcom from an investment perspective, despite a recent lull in stock momentum, its forward price-to-earnings (P/E) ratio presents an attractive opportunity for potential investors. With a market saturated with possibilities for AI infrastructure investment—estimated by McKinsey & Company at a staggering $7 trillion through the end of the decade—Broadcom appears well positioned to capitalize on the ongoing demand for advanced chip technologies.
The emergence of a new $10 billion customer, irrespective of its identity, signifies Broadcom’s robust enterprise and its capacity to engage with various hyperscalers and AI developers over time. Thus, the company could represent a solid buy-and-hold opportunity for investors as the AI infrastructure sector continues to gain momentum. This scenario paints a promising picture for Broadcom and its strategic future in the technology landscape.