AI shovel seller Broadcom's total revenue increased by 34%, but semiconductor re

AI shovel seller Broadcom's total revenue increased by 34%, but semiconductor re

Broadcom anticipates that revenue from artificial intelligence will be even more robust, accounting for approximately 35% of semiconductor revenue, surpassing $10 billion.

On March 7th local time, after the U.S. stock market closed, Broadcom released its financial report for the first quarter of the fiscal year 2024, which ended on February 4, 2024. The company's net revenue for the quarter increased by 34% year-over-year to $11.961 billion, exceeding analysts' forecasts of $11.8 billion. The adjusted net profit was $5.25 billion, also higher than the expected $5.01 billion from analysts. The adjusted earnings per share were $10.99, compared to the expected $10.30 per share.

The latest performance data from the company shows that the semiconductor business unit revenue was around $7.39 billion for the first fiscal quarter. Although a year-over-year increase of 4% suggests a clear recovery in demand for Broadcom chips, it fell short of the widely expected $7.7 billion by Wall Street analysts. This data largely led to a more than 8% drop in Broadcom's stock price after the earnings announcement, although the decline was significantly narrowed afterward.

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The financial report data indicates that a "spending boom" by global enterprises in artificial intelligence has stimulated strong demand for Broadcom's Ethernet switch chips. However, the company is dealing with a slowdown in chip sales in certain areas such as smartphones and telecommunications infrastructure, which puts significant pressure on its semiconductor business.

For the entire fiscal year, Broadcom maintained its revenue guidance of around $50 billion, a figure slightly below analysts' expectations. CEO Hock Tan stated in a subsequent earnings call that nearly one-fifth of the company's revenue in 2024 is expected to come from artificial intelligence.

Tan mentioned that first-quarter AI revenue doubled from the same period last year, reaching $2.3 billion, significantly offsetting the losses brought about by the current cyclical slowdown.

Tan also said, "We told everyone in December that revenue from artificial intelligence would account for 25% of our annual semiconductor revenue. We now anticipate that AI will bring in even stronger revenue, representing about 35% of our semiconductor revenue, exceeding $10 billion, which is enough to offset the weaker-than-expected demand for broadband and server storage."In terms of financial outlook data, Broadcom anticipates that its total revenue for the fiscal year ending in October 2024 will reach $50 billion, expecting an approximate 40% year-over-year increase compared to the fiscal year 2023, which is in line with the consensus expectations of analysts.

However, Broadcom has suspended the release of quarterly forecast data, as the company is currently engaged in integration and restructuring efforts related to its recent acquisition of VMware, a provider of virtualization and cloud services technology.

Broadcom, known for its custom chips, is considered a leader in the ASIC (Application-Specific Integrated Circuit) market.

AI ASIC chips require high-performance communication and data transfer chips to support the high-speed processing and transportation of data. Broadcom's network chip technology provides support in this regard, such as helping Google's multiple TPU chips achieve efficient data processing capabilities. Broadcom supplies key semiconductor components to cloud computing giants like Google, including Network Interface Cards (NICs) and switch chips, which are fundamental to building high-speed, efficient data centers.

According to a report from the renowned research institution IDC, it is expected that in 2023, global AI spending—covering software, hardware, and other services centered around AI systems—will reach approximately $154 billion, a 26.9% increase from the total expenditure in 2022. IDC forecasts a Compound Annual Growth Rate (CAGR) of up to 27.0% during the period from 2022 to 2026, and expects the total expenditure on AI-centric systems (including software, hardware, and other services) to exceed $300 billion by 2026.

Since 2023, the global AI boom has stimulated a surge in Broadcom's stock price by 104%. This year, driven by strong financial performances from chip companies such as NVIDIA and TSMC, this AI fervor continues to ferment, with Broadcom's stock price rising by about 26%, currently ranking ninth in the U.S. stock market value ranking.

AI concept stocks accelerate in 2024

If 2023 was the inaugural year for AI (Artificial Intelligence) concept stocks, then 2024 is the year when AI concept stocks are set to accelerate. This year, from AI chip giant NVIDIA to AI server and storage equipment manufacturers like Super Micro Computer, they have all become industry winners, leading the rise in AI concept stocks.

So far this fiscal reporting season, from ARM Technology to TSMC, and from ACM Research to Dell last week, almost all the latest financial reports from AI companies have brought about significant increases in individual stocks and the overall AI concept stock market. Relevant financial report data shows that the demand for AI hardware and components is growing exponentially, exceeding Wall Street expectations.The market continues to be bullish on NVIDIA

According to data, NVIDIA controls about 80% of the high-end AI chip market, with customers including OpenAI, Microsoft, Alphabet, and Meta Platforms all vying to purchase its chips in order to gain a greater competitive edge in the rapidly emerging field of generative artificial intelligence (Generative AI).

NVIDIA has also recently replaced Tesla as the most crowded stock on Wall Street (measured by market capitalization). Over the past 30 trading days, investors have been trading an average of $36 billion worth of NVIDIA shares daily, compared to $21 billion for Tesla. Last Friday, NVIDIA's stock traded a single-day volume of $38 billion.

Janus Henderson Investors portfolio manager Richard Clode said that since mid-2023, the market's debate on NVIDIA has mainly focused on its growth trends for 2025 and beyond, rather than its current strong performance. "Through this year's Consumer Electronics Show (CES) and recent financial reports, NVIDIA has largely proven to the market that its development will not stagnate soon."

Tejas Dessai, a research analyst at Global X ETFs, also sees long-term potential in NVIDIA.

He analyzed that in the coming years, NVIDIA's data centers will replace chips worth trillions of dollars to keep pace with the development of generative AI, providing NVIDIA with a huge potential market; NVIDIA already enjoys a leading position in the high-end AI chip field and is expected to hold a significant market share until 2030; in addition to AI processors, NVIDIA's extensive product offerings, such as networking solutions, greatly enhance its profitability in emerging computing fields; beyond hardware, NVIDIA's CUDA platform also helps to solidify its position in software. This platform allows AI developers to effectively deploy workloads and use graphics processing units (GPUs) clusters. The unique positioning of this software helps NVIDIA defend its market share while building user stickiness.

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