By Broadcom Inc (NASDAQ: AVGO) chief executive Hock Tan says the company has secured two new hyperscale customers for its custom AI chips.
The announcement follows a report that AVGO is working with Apple Inc on a custom chip.
So, it’s conceivable that one of the new customers CEO Tan talked about on the earnings call is AAPL.
Note that Broadcom already serves three other “unnamed” hyperscalers as well.
Broadcom stock is up 15% this morning after reporting strong earnings for its fourth financial quarter and making a string of upbeat comments on its AI business.
Broadcom has a history of working with Apple
Broadcom expects the two new AI customers to contribute to its topline before the start of 2027.
The multinational is not really new to working with Apple as it already makes chips and wireless connectivity components for iPhone.
But there have been reports that the tech titan wants to build capacity to produce at least some of those products in-house that could hurt AVGO revenues.
Responding to such concerns, chief executive Hock Tan said “we continue to be very engaged with this customer in multi-year roadmaps across various technologies.”
Broadcom stock is now up some 90% versus the start of 2024.
Earlier this week, Invezz correctly predicted that it will surpass $200 following the earnings release.
Cramer names AVGO’s mystery hyperscale customers
CEO Hock Tan was all praise on the call as he discussed the AI business with the three mystery hyperscalers.
He expects the company’s serviceable addressable market for artificial intelligence to be worth between $60 billion to $90 billion by fiscal 2027 – an estimate he said may prove to be conservative.
While Broadcom itself doesn’t name its three hyperscale customers, Jim Cramer predicts they are Alphabet Inc, Meta Platforms, and TikTok owner ByteDance.
The Mad Money host recommends buying Broadcom stock on any future dip and sees upside in it to $230 that indicates potential for another 13% upside from here.
Why is Cramer bullish on Broadcom stock?
Broadcom did not announce a share repurchase programme last night that many were hoping for.
But the company said it’s using the capital to lower its debt load that Cramer dubbed an “acceptable trade-off” in his note to members of his Investing Club.
Jim Cramer is bullish on Broadcom stock as it’s a premium quality semiconductor giant.
He also has confidence in the leadership of Hock Tan who’s known to drive value with a splendid M&A strategy.
The famed investor expects AVGO’s networking components and custom chips to emerge as one of the biggest beneficiaries of artificial intelligence.
He dubs Broadcom stock attractive compared to other chips stocks in terms of the price-to-earnings ratio as well.
Shares of the AI company currently pay a dividend yield of 1.17% that makes them all the more exciting to own at writing.
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