Broadcom experienced strong growth in AI revenue in its latest quarter, but the highlight was a $10 billion custom chip order from a new customer. The company anticipates a significant AI chip opportunity ahead, with shares surging after the news. Analysts predict the new customer could be OpenAI, boosting Broadcom’s future prospects.

The custom AI chip business has been lucrative for Broadcom, especially after helping Alphabet develop tensor processing units. The company’s three primary custom AI chip customers have contributed to significant growth, with AI revenue increasing by 63%. Overall revenue rose by 22% year over year, surpassing analyst expectations. Broadcom’s cash flow remains strong, with optimistic revenue forecasts for fiscal Q4.

Looking ahead, Broadcom is poised for growth in both semiconductor and infrastructure software revenue. The company anticipates a surge in AI semiconductor revenue, with adjusted EBITDA expected to reflect revenue growth. Despite a high forward P/E ratio, Broadcom’s strong growth outlook suggests potential undervaluation. The company’s momentum in the AI infrastructure market indicates a promising future for investors looking to buy stock.

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Read more at Nasdaq: Broadcom Shares Surge on New AI Chip Customer Announcement. Is It Too Late to Buy the Stock?