Broadcom scores $10B AI chip deal, shares surge 11% premarket

Broadcom shares surged 11% in premarket trading after the chipmaker announced a massive $10 billion AI chip order from a new customer, marking one of the largest deals in the company’s history. The blockbuster agreement reinforces Broadcom’s position as a leading custom chip provider as Big Tech companies seek alternatives to Nvidia’s expensive and supply-constrained processors, while potentially adding over $160 billion to the company’s $1.44 trillion market valuation.

What you should know: The deal represents a significant milestone in Broadcom’s AI strategy and could reshape competitive dynamics in the custom chip market.

• If premarket gains hold, Broadcom would cross new valuation territory, building on shares that are already up 32% this year after more than doubling in 2024.
• The company expects “significantly improved” AI revenue growth in fiscal 2026, with analysts projecting AI sales could exceed $40 billion, up from previous expectations of $30 billion.

Who the customer likely is: Multiple analysts point to OpenAI as the unnamed customer behind this massive chip order.

• J.P.Morgan, Bernstein, and Morgan Stanley analysts cited the timing and scale of the deal as evidence pointing toward OpenAI.
• Reuters previously reported that OpenAI was collaborating with Broadcom to develop its first in-house chip, adding credibility to this speculation.
• Broadcom’s existing custom chip customers are believed to include Alphabet’s Google and Meta Platforms, though the company doesn’t publicly identify its cloud clients.

The big picture: This deal solidifies Broadcom’s role in helping major tech companies reduce their dependence on Nvidia’s AI processors.

• “While we agree Broadcom is taking more share, we believe the AI pie could just be getting bigger,” BofA Securities analysts said.
• The agreement could help reinforce investor confidence in the AI rally, which has shown signs of weakening throughout the year.

Leadership continuity: CEO Hock Tan announced he will remain at the helm for at least five more years, providing stability during this critical growth phase.

• Tan, who was 73 as of Broadcom’s March proxy filing, has led the chipmaker for nearly two decades and positioned it at the center of the AI boom.
• His continued leadership signals long-term commitment to executing Broadcom’s AI strategy and maintaining relationships with major tech customers.

Market context: Broadcom’s surge comes as the semiconductor industry navigates supply constraints and increasing demand for AI-specific chips.

• The company has significantly outperformed both the S&P 500 and semiconductor benchmarks this year.
• With Bernstein analysts projecting AI sales could reach “well over $40 billion” in fiscal 2026, Broadcom is positioning itself as a critical player in the custom silicon market that’s emerging as an alternative to Nvidia’s dominance.