- Broadcom becomes the ninth US company to achieve a $1 trillion market cap.
- Broadcom stock surged 21% on Friday after CEO Hock Tan gave bullish guidance.
- Hock Tan said on earnings call that the custom XPU market could reach $90 billion in three years.
- AVGO stock reaches an intraday high of $221.21.
Broadcom (AVGO) stock surged more than 21% on Friday morning after management estimated on Thursday’s earnings call that the market for customized AI accelerators might reach $90 billion in fiscal year 2027.
As a major contributor to customized chips, Broadcom’s shares soared above $215 at the open, rising above a $1 trillion market cap. With 4.67 billion shares outstanding at last count, Broadcom needs roughly a $214.13 share price to achieve the $1 trillion club.
This achievement places Broadcom in the same category as other Magnificent Seven stocks like Microsoft (MSFT), Amazon (AMZN) and Nvidia (NVDA). Broadcom is the ninth public company in the United States (US) to achieve this feat and the twelfth in the world. Warren Buffet’s Berkshire Hathaway (BRK-B) reached a $1 billion market cap on August 28, earlier this year. Taiwan’s Taiwan Semiconductor (TSM) did the same on October 17.
Broadcom stock news
Broadcom reported fiscal fourth-quarter results after the market closed on Thursday. The chip maker earned $1.42 in adjusted earnings per share (EPS) on revenue of $14.03 billion, up 51% from a year ago.
This was not too surprising, with the company beating the bottom line consensus by $0.03 and largely in line with sales for the quarter.
However, the market became euphoric when CEO Hock Tan mentioned just how big he saw the custom AI accelerator (XPU) market growing.
“As you know, we currently have three hyper-scale customers who have developed their own multi-generational AI XPU roadmap to be deployed at varying rates over the next three years,” Tan said. “In 2027, we believe each of them plans to deploy 1 million XPU clusters across a single fabric. We expect this to represent an AI revenue Serviceable Addressable Market, or SAM, for XPUs and network in the range of $60 billion to $90 billion in fiscal 2027 alone.”
Broadcom already dominates the XPU market and is building custom chips for a number of big tech companies, including Alphabet (GOOGL) and Meta Platforms (META). It was already reported that Broadcom was working with Apple (AAPL) on a custom in-house server chip.
“Broadcom’s fiscal year 2024 revenue grew 44% YoY to a record $51.6 billion, as infrastructure software revenue grew to $21.5 billion, on the successful integration of VMware,” CEO Hock Tan continued. “Semiconductor revenue was a record $30.1 billion driven by AI revenue of $12.2 billion. AI revenue, which grew 220% YoY, was driven by our leading AI XPUs and Ethernet networking portfolio.”
Broadcom stock news
It is rare for a megacap company (Broadcom was already worth more than $850 billion) to climb this furiously, but it clearly has done so. Broadcom added nearly $200 billion to its market cap in just one session.
AVGO overtook the 161.8% Fibonacci Extension at $215.86 and has thus far reached an intraday high of $221.21. The next Fibo comes at the 261.8% extension at $234.90.
In the meantime, AVGO looks overstretched on the Relative Strength Index (RSI). Its “overbought” reading on the RSI is 78, and 70 is normally the cutoff point for when traders expect a reversal. However, the thrill of being the newest $1 trillion club member should reveal itself in ample buying on any near-term weakness. If any weakness persists, expect prior resistance at $185 to hold.
AVGO daily stock chart