Artificial Intelligence demand boosts Broadcom to trillion-dollar club
Artificial Intelligence demand boosts Broadcom to trillion-dollar club
Artificial Intelligence demand boosts Broadcom to trillion-dollar club
12.19.2024
Move over Nvidia. Rival chipmaker Broadcom has bumped its way into the trillion-dollar market-cap club thanks to booming demand for artificial intelligence (AI) processors.1
Broadcom reported better-than-expected fourth-quarter earnings last week and noted a three-fold increase in AI revenue.2 The company’s extremely positive outlook sent shares soaring and the company’s market cap — roughly $800 billion before the earnings announcement — into rarefied territory.3
Broadcom CEO Hock Tan said the company is developing custom AI chips for three big technology companies with large cloud computing data centers. Tan said that he expects each of them to deploy 1 million AI chips by 2027.4
Big Spenders
There’s been no spending restraint on AI this year by tech giants such as Amazon, Microsoft, Facebook parent Meta, and Alphabet’s Google.5 The companies have been rushing to incorporate AI into their operations and deploy new user-friendly AI tools for consumers.6
Read more: ‘Solid’ consumer spending walks a fine line toward 2025
Leading chipmaker Nvidia posted very strong third quarter earnings last month as AI chip demand soared in several areas, including graphic-processing units for computers and gaming consoles.7
Nvidia joined the trillion-dollar market-cap club in 2023 and hasn’t looked back.8 Nvidia shares tripled in 2024.9 With a market cap above $3 trillion, the chip maker routinely battles with Apple for the title of most valuable publicly traded company.10
Trillion-Dollar Tech
Electric vehicle maker Tesla is forking out an estimated $10 billion in AI-related capital expenditures this year, including between $3 billion and $4 billion on Nvidia chips.11
Tesla itself regained entry to the trillion-dollar market-cap club last month after a long hiatus.12 Tesla’s stock is up more than 80% since the Nov. 5 election, adding more than $650 billion in market cap.13
With Broadcom and Tesla, the exclusive trillion-dollar club now includes 8 tech companies. Apple, Nvidia, Meta, Amazon, Alphabet, and Microsoft are the other tech members.14
Four of those members — Microsoft, Meta, Amazon, and Alphabet— are projected to spend a quarter trillion dollars predominantly towards AI infrastructure next year, according to one estimate.15
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1 Marketwatch, “Broadcom can have its own ‘Nvidia moment’ as stock swells further,” December 2024.
2 CNBC, “Broadcom shares rise 13% on profit beat, ‘massive’ opportunity in AI,” December 2024.
3 Marketwatch, “Broadcom can have its own ‘Nvidia moment’ as stock swells further,” December 2024.
4 Barrons, “Nvidia Stock Drops. What Broadcom Earnings Mean for the AI Chip Maker,” Barrons, December 2024.
5 Bloomberg, “Big Tech's $62 Billion AI Spending Fuels Pick-and-Shovel Bets,” December 2024.
6 Quartz, The 'consumer AI revolution' will be powered by Big Tech's most familiar products,” November 2024.
7 CNBC, Nvidia nearly doubles revenue on strong AI demand,” November 2024.
8 Wall Street Journal, “Nvidia Joins $1 Trillion Club, Fueled by AI’s Rise,” June 2023.
9 CNBC, “Nvidia passes Apple as world’s most valuable company,” November 2024.
10 Wall Street Journal, “Nvidia Is World's Most Valuable Company Again, Passing Apple,” November 2024.
11 Reuters, “Tesla likely to spend $3 bln-$4 bln on Nvidia hardware this year,” June 2024.
12 Wall Street Journal, “Tesla at $1 Trillion Finally Clears Its Twitter Discount,” November 2024.
13 CNBC “Tesla hits $1 trillion market cap as stock rallies after Trump win,” November 2024.
14 CNBC, “Broadcom’s long and winding path to the trillion-dollar club, and how Trump played a role,” November 2024.
15 Forbes, AI Spending To Exceed A Quarter Trillion Next Year,” November 2024.
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