Broadcom stock jumps 15% on new $10 billion customer that analysts say is OpenAI

Broadcom's shares experienced a significant surge of 15% on Friday, following the chipmaker's announcement during its earnings call regarding a groundbreaking $10 billion order from a new customer. Analysts quickly identified this major client as likely being OpenAI. In a strong earnings report released late Thursday, Broadcom's CEO Hock Tan revealed that a fourth major customer had placed substantial orders for their custom artificial intelligence chips, dubbed XPUs. "One of these prospects released production orders to Broadcom, and we have accordingly characterized them as a qualified customer for XPUs," Tan stated. This development has led to an optimistic revision of Broadcom's AI revenue forecasts for the upcoming year when shipments are set to commence. Analysts from Mizuho, Cantor Fitzgerald, and KeyBanc all expressed confidence that OpenAI is indeed the new customer. The Financial Times reported that the two companies collaborated on designing a chip that is expected to launch next year. OpenAI, however, has opted not to comment on these speculations. While Broadcom has not publicly named its significant web-scale clients, analysts have noted that its first three customers are likely Google, Meta, and ByteDance, the parent company of TikTok. Cantor Fitzgerald's analysts noted that the announcement of the $10 billion order from the fourth XPU customer indicates considerable growth potential alongside its existing clients. Broadcom's stock has been experiencing a remarkable surge, positioning the company alongside Nvidia in the race to develop the processors and infrastructure necessary for extensive AI workloads. Over the past year, Broadcom's stock has risen approximately 130%, elevating its market capitalization to over $1.6 trillion. In its fiscal third quarter report, Broadcom exceeded earnings and revenue expectations, projecting $17.4 billion in revenue for the fourth quarter, surpassing the $17.02 billion anticipated by Wall Street analysts. AI revenue is expected to reach $6.2 billion. The announcement of this $10 billion customer has ignited excitement on Wall Street, with Tan commenting on the "immediate and fairly substantial demand" that enhances the company's outlook for the near future. Though specific guidance for next year was not provided, Tan hinted at potential growth in the AI sector exceeding the previously mentioned 50% to 60% range. Mizuho analysts have subsequently revised their growth estimate for AI revenue for next year to 76%, up from an earlier estimate of around 60%. This adjustment anticipates a total revenue of $35 billion. Furthermore, total revenue projections for the year ending October 2026 are expected to increase by approximately 30%, reaching $81.8 billion, compared to $63.1 billion for the fiscal year. Broadcom's extensive software division, bolstered by its recent $61 billion acquisition of VMware in 2023, has also contributed to its impressive growth, with revenue in the infrastructure software segment rising 43% to $6.79 billion.