Broadcom shares closed at $250 on the New York Stock Exchange on the 16th (local time), up 11% from the previous trading day. The market capitalization soared 24.4% on the 13th, surpassing $1 trillion for the first time in history, and closed sharply higher for two consecutive days.
Behind the rise in stock prices is that Broadcom is expected to threaten Nvidia, which is dominating the AI chip market. Broadcom said in its quarterly results on the 12th that it is developing AI chips with three large clouds. CNBC, a U.S. economic media, said, “Broadcom has not disclosed the name of the customer, but experts are making it a fact with Google, Meta Platforms, and ByteDance in China.”
These companies are expected to use the AI chips designed by Broadcom in their data centers by 2027. Broadcom is said to be cooperating with Apple and OpenAI to develop AI chips.
Analysts say that as Big Tech develops its own AI chips with Broadcom, Nvidia’s dominant system could crack. Broadcom does not develop its own AI chips like Nvidia, but it could threaten Nvidia, which controls 80% of the AI chip market through Big Tech and each on-demand chip development.
Major investment banks are scrambling to raise Broadcom’s target. Goldman Sachs raised Broadcom’s 12-month price target from $190 to $240 and Barclays to $205 from $200 to $260. Truist raised the price to $260 from $245. Bernstein named Broadcom as the best Australia among semiconductor stocks.
Nvidia’s stock price has entered a phase of adjustment. Nvidia’s stock price fell 1.68 percent to close at 132 U.S. dollars on the day among Nasdaq’s seven big technologies, including Alphabet (Google’s parent company, 6.14 percent) and Tesla (3.54%). Nvidia’s stock price fell 10.9 percent from its closing high of 148.28 dollars last month. Its market cap also shrank to 3.232 trillion dollars, giving way to Microsoft as the second largest market cap.
“NVIDIA and its chips are needed for (AI) infrastructure, but the market is saying there are other beneficiaries besides NVIDIA,” said Keith Lerner, co-chief investment officer at U.S. investment advisory firm Truist Advisory Services.
However, some say that it is uncertain whether Broadcom can actually threaten Nvidia. Nvidia has been building an ecosystem of Nvidia that has great “lock-in effects” through its programming software, CUDA, which only works on its AI chips. This is why Intel and AMD, latecomers to AI chip development, and Big Tech, which succeeded in developing their own AI chips, have so far failed to surpass Nvidia’s stronghold.
JULIE KIM
US ASIA JOURNAL
