Broadcom shares rally on new AI deal, CEO's assurance

Broadcom shares jumped 7% in premarket trading on Friday, as an upbeat outlook for artificial intelligence revenue and CEO Hock Tan's pledge to stay on for five more years reassured investors betting on the chipmaker's custom silicon strategy.

The firm, one of the world's most valuable chipmakers, has become a key player in the generative AI boom by designing custom semiconductors for cloud giants seeking alternatives to Nvidia's GPUs.

The company on Thursday said it has secured over $10 billion in AI infrastructure orders from a new customer, with Tan forecasting "significantly improved" AI revenue growth in fiscal year 2026.


"Broadcom narrative is going to take off once again," Bernstein analysts led by Stacy Rasgon said.

Tan's decision to extend his tenure through 2030 added to investor confidence.

"Hock must see a runway here as he renewed his contract...suggesting he sees something worth sticking around for," Bernstein analysts said.

Investors have bet big on AI-driven chipmakers, and have propelled Broadcom's shares nearly 32% higher so far this year, after the company's valuation crossed $1 trillion in December.

Large deal buzz

The timing of Broadcom's latest $10 billion AI deal has fueled speculation that OpenAI is the unnamed customer, following a Financial Times report on Thursday that the ChatGPT maker is working with Broadcom to develop its own custom AI chips.

Tan said the new partnership would materially boost AI revenue, though he declined to name the client.

The CEO earlier this year had hinted at four new potential customers who were "deeply engaged" with the company to create their own custom chips, in addition to its three existing large clients.

J.P.Morgan analysts, who believe the new customer is OpenAI, said the ramp up will "materially increase" Broadcom's AI revenue outlook for fiscal 2026 and beyond, calling it a "turning point" that adds to the company's already strong pipeline of custom silicon wins.

Analysts at Bernstein and Morgan Stanley also said that the timing and scale of the deal suggest OpenAI is likely behind it.

The Broadcom stock trades at 38.6 times its forward earnings estimates, a premium to Marvell's 20.3 multiple and the broader S&P 500 index's 22.5, according to LSEG data.