Broadcom Shares Surge on Speculation of $10 Billion OpenAI Deal

Broadcom (AVGO) shares surged 15% on Friday, fueled by the chipmaker’s announcement during its earnings call that it had secured a significant new customer with a $10 billion commitment. The news immediately sparked speculation among analysts, with a consensus forming around OpenAI as the likely beneficiary of Broadcom’s custom AI chip (XPU) technology.

The revelation followed a better-than-expected earnings report late Thursday. Broadcom CEO Hock Tan informed analysts about the fourth major client placing orders for $10 billion worth of custom artificial intelligence chips, internally known as XPUs.

“One of these prospects released production orders to Broadcom, and we have accordingly characterized them as a qualified customer for XPUs,” Tan stated, emphasizing that the new order has significantly boosted Broadcom’s AI revenue forecast for the upcoming year, when shipments are slated to commence.

Analysts at Mizuho, Cantor Fitzgerald, and KeyBanc swiftly identified AI powerhouse OpenAI as the probable customer. This speculation aligns with a recent report suggesting a co-designed chip venture between the two firms, expected to materialize commercially next year.

OpenAI has so far declined to address the speculation directly.

While Broadcom maintains a policy of not disclosing the names of its large web-scale clients, industry observers have previously identified Google (GOOGL), Meta (META), and TikTok’s parent company, ByteDance, as the company’s initial three major XPU customers. These partnerships highlight Broadcom’s crucial role in enabling the AI infrastructure of some of the world’s largest tech firms.

“During the call, the company surprised us by noting that it had secured a $10B order from a fourth XPU customer (we believe this is OpenAI), adding significant upside to the company’s three current XPU customers (Google, Meta, and ByteDance),” Cantor’s analysts wrote. “Shipments are expected to commence in 2026.”

Broadcom’s stock has experienced remarkable growth as the company competes alongside Nvidia (NVDA) in developing cutting-edge processors and infrastructure ideal for intensive AI applications. Over the past year, the stock has grown by approximately 130%, pushing Broadcom’s market capitalization beyond $1.6 trillion. This surge reflects investor confidence in Broadcom’s strategic position within the rapidly expanding AI sector.

Broadcom’s fiscal third-quarter results surpassed expectations, with earnings and revenue both exceeding estimates. The company is projecting fourth-quarter revenue of $17.4 billion, exceeding analysts’ projections of $17.02 billion, with AI revenue reaching $6.2 billion. This steady growth showcases Broadcom’s ability to capitalize on the ever-increasing demand for AI solutions.

The announcement of a new $10 billion customer, however, triggered the most excitement on Wall Street.

Tan noted during the call that “immediate and fairly substantial demand” is improving the outlook for the coming year, “and really changes our thinking of what 2026 would be starting to look like.” This is a signal for sustained growth in the mid to long term.

Though the company did not provide specific guidance for the next year, Tan suggested that growth in its AI sector could surpass the 50% to 60% range he mentioned during the previous call. This bolder outlook demonstrates Broadcom’s increasing confidence in its AI product roadmap and its ability to capture market share.

Analysts at Mizuho have adjusted their AI revenue growth estimate for the coming year to 76%, up from approximately 60%, which would take the total to $35 billion. Total revenue for the year ending in October 2026 is projected to grow by about 30%, from $63.1 billion this fiscal year to $81.8 billion, according to analysts surveyed by LSEG. These projections further underscore the significant impact of this new partnership on Broadcom’s long-term financial performance.

In addition to its hardware business, boosted by XPUs, Broadcom maintains a large software division, spearheaded by the $61 billion purchase of VMware in 2023. Revenue in the infrastructure software division, which includes VMWare, rose 43% to $6.79 billion. This highlights Broadcom’s diversification and strategic expansion into critical areas like virtualization and cloud infrastructure, providing a balanced portfolio that minimizes risk and maximizes growth opportunities.

The potential collaboration between Broadcom and OpenAI represents a significant strategic move in the rapidly evolving AI landscape. By co-designing custom silicon, OpenAI aims to optimize its AI models for performance and efficiency, gaining a competitive edge in training and deployment. Conversely, the $10 billion order provides Broadcom with a stable demand forecast and helps to solidify its presence in the AI accelerator market, challenging established players like Nvidia.