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Broadcom has recently won Google’s next-gen AI ASIC chip design: JPMorgan

Published 06/06/2024, 08:36 AM
Updated 06/06/2024, 08:39 AM
© Reuters.  Broadcom (AVGO) has recently won Google’s next-gen AI ASIC chip design: JPMorgan

Analysts at JPMorgan said in a note Thursday that Broadcom (NASDAQ:AVGO) has secured the design contract for Google (NASDAQ:GOOGL)'s next-generation AI chip, the TPU v7.

JPMorgan cites "primary research efforts" and Broadcom's recent analyst day announcement as reasons it believes the company won the next-gen Google AI chip design.

This "marks seven generations of AI processor chip families that Broadcom has helped Google bring to market," the note from JPMorgan states.

This long-standing partnership positions Broadcom to benefit significantly from Google's ongoing investment in AI technology.

Analysts at JPMorgan project that Google's TPU program will generate over $8 billion in revenue for Broadcom this year, reflecting a 125% year-over-year increase. They forecast this number to climb to over $10 billion in 2025. This growth is attributed to the upcoming TPU v5 and v6 chips.

The report also highlights Broadcom's success with Meta Platforms (NASDAQ:META). "Meta engaged with Broadcom to co-design Meta's first- and second-generation AI training processors," the analysts say.

They expect Broadcom to ramp production of Meta's third-generation AI chip (MTIA 3) in the latter half of 2024 and into 2025.

Overall, analysts estimate Broadcom's AI revenue will reach $11-12 billion this year and surpass $14-15 billion in 2025. This positions Broadcom as the second-largest AI semiconductor supplier globally, behind Nvidia.

Analysts emphasize Broadcom's dominance in the leading-edge custom chip design market (7nm, 5nm, 3nm, 2nm). They estimate the company holds a 55-60% market share in this segment, with a customer base that includes major tech players like Apple, Microsoft, and Meta.

The bank reiterated its Overweight rating on Broadcom's stock (AVGO).

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