Broadcom: A Rather Promising Chip Play

Now, Broadcom (AVGO +0.17%). It’s a name that doesn’t immediately conjure images of daring innovation, does it? More likely, it suggests… well, broadband. But bear with me. This isn’t about getting a slightly faster connection to watch cat videos. It’s about the utterly bewildering world of artificial intelligence, and the bits of silicon that make it all hum along. The stock has had a bit of a wobble recently – down about 20% from its peak in December – and that, frankly, looks like a rather decent opportunity. Not a guaranteed fortune, mind you, but a chance to get in on something that might just be…significant.

Cathie Wood, a lady who knows a thing or two about where the money is going (or, at least, where she thinks it is), predicts that spending on AI infrastructure will balloon from around $500 billion to a rather astonishing $1.4 trillion by 2030. That’s a lot of servers, a lot of power consumption, and a lot of very clever people scratching their heads. What’s particularly interesting is where she sees the spending going. It’s not just about raw computing power, you see. She reckons the growth in networking components – the stuff that actually moves the data – will outpace it, and that these specialized AI chips, known as ASICs, will start to eat into the market share of those familiar graphics processing units (GPUs) everyone’s been hearing about. It’s like a digital game of chess, only with billions of dollars at stake.

A Networking and ASIC Leader

Now, why is this good news for Broadcom? Well, they’re rather good at both networking and ASICs. They make the components – Ethernet switches, optical receivers, the sort of things that sound terribly complicated but are essentially the plumbing of the internet – that manage the flow of data. As these AI systems get bigger and more complex – and believe me, they’re heading that way – the need for efficient data transfer only increases. Think of it as trying to move a mountain of sand with a teaspoon versus a conveyor belt. You get the idea.

But the real potential lies in these custom AI chips. Broadcom doesn’t actually design the chips themselves – that’s left to the customer – but they provide the building blocks, the intellectual property, and, crucially, the manufacturing expertise to turn those designs into actual, physical chips. They’ve got a good relationship with Taiwan Semiconductor Manufacturing, which is a bit like having a reliable supplier of bricks when everyone else is scrambling for pebbles. It allows them to scale up production when things get busy, which, judging by the current trajectory, they very much will be.

They even helped Alphabet with their Tensor Processing Units (TPUs), those little wonders that power Google’s AI. Apparently, demand is ramping up rapidly, not just for Google’s own use but for its cloud computing customers as well. And Anthropic recently placed a $21 billion order for TPUs through Google Cloud. That’s a lot of chips. A truly staggering number, actually. Makes you wonder how many cat videos they’ll be able to process.

Meanwhile, other companies – Meta Platforms and OpenAI, for example – are also working on their own custom AI ASICs. Analysts at Citigroup are predicting that Broadcom’s AI revenue could climb fivefold over the next two years, from $20 billion to $100 billion. Now, Broadcom’s total revenue last year was only $63.9 billion, so that’s… substantial growth. To put it mildly. It’s the sort of number that makes you double-check your calculations.

So, with Broadcom poised for what looks like explosive revenue growth, that recent dip in the stock price feels… well, let’s just say it looks like a rather sensible opportunity. Not a sure thing, of course. Nothing ever is. But a chance to get in on what could be a very interesting ride. And in the world of technology, that’s often more than enough.

2026-02-01 21:42

A Networking and ASIC Leader

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