Broadcom Stock Climbs on AI Chip Collaboration with Apple

Shares of Broadcom (AVGO) rose today after reports emerged about its partnership with Apple (AAPL) to develop an artificial intelligence (AI) chip.

This collaboration could propel Broadcom's growth in a market that has largely been dominated by Nvidia so far, while also reinforcing its relationship with Apple, the largest consumer electronics company in the world.

As of 10:21 a.m. ET, the price of Broadcom's stock had increased by 4.9% following the news.

Collaboration Between Tech Giants

The Information reported that Apple is in the process of creating its first AI server chip and is collaborating with Broadcom to enhance its networking technology.

While the specifics of this partnership remain unclear, it presents a significant opportunity for Broadcom. With Apple's vast user base of over 2 billion devices and the introduction of its Apple Intelligence initiative, the company is positioning itself to become a formidable player in the AI sector, although it hasn't made a major impact in this field yet.

Notably, Apple is Broadcom's largest customer, contributing 20% of its revenue in fiscal years 2023 and 2022. This makes the partnership on AI not surprising, especially considering Broadcom's expertise in networking chips.

The Future of Broadcom

This news comes just before Broadcom's upcoming fourth-quarter earnings report, which is anticipated to showcase strong performance both in revenue and profit, partly thanks to its acquisition of VMware, a virtualization software company.

Analysts predict that Broadcom's revenue for the quarter will increase by 51.2% to reach $14.1 billion, with adjusted earnings per share rising from $1.11 to $1.39.

Investors will likely pay close attention to the company's prospective growth in the AI sector, as this technology is becoming increasingly important within the chip market. Broadcom had previously indicated an expected AI revenue of $12 billion for fiscal 2024, a figure to keep in mind when the earnings report is released.

Jeremy Bowman holds shares in Broadcom. The Motley Fool has investments in and recommends Apple and Nvidia, as well as Broadcom.

Broadcom, Apple, AI