Shares of heavyweight chipmaker Broadcom jumped 5% in Thursday’s trade, hitting a three-week high of $330 per share, even as key Wall Street averages were trading lower.
The rally in the stock on 6 April was triggered after the chipmaker announced a long-term agreement with Google to develop and supply Tensor Processing Units. The companies also confirmed plans to work with Anthropic to power the AI startup’s burgeoning operations.
The deals run through 2031 and centre on tensor processing units, or TPUs, which Broadcom will help develop for Google’s AI data centres. Anthropic will also get access to 3.5 gigawatts of computing capacity from Google’s AI chips starting in 2027.
The TPUs will be used to train and deploy frontier Claude models to meet the growing demand for the company’s technology offerings from customers worldwide.
In its filing on Monday, Broadcom said it has entered into a long-term agreement with Google to supply future generations of the internet giant’s TPUs, which are designed to power artificial intelligence in data centres.
“The consumption of such expanded AI compute capacity by Anthropic is dependent on Anthropic’s continued commercial success. In connection with this deployment, the parties are in discussions with certain operational and financial partners,” Broadcom said in the filing.
Google’s TPUs were originally designed to speed up its ubiquitous search engine but have since become useful for creating and running AI software. Broadcom takes Google’s specifications and creates fully formed designs that can then be sent for manufacturing.
The new partnership with Broadcom comes at a time when its business is performing well. Beyond Broadcom’s custom AI chip work, the company continues to update its networking equipment to better connect the computing power required to run artificial intelligence models.
Alphabet, Microsoft, Amazon, and Meta Platforms are expected to spend more than $600 billion to build AI infrastructure this year, boosting demand for chips, servers, storage, and networking equipment.
The company earlier projected AI chip revenue of $10.7 billion for the current quarter, suggesting that reaching a $100 billion annual run rate would mark a significant leap.
Broadcom shares still down 21% from recent highs
Although the chipmaker’s shares have maintained a winning run lately, they are still down about 21% from the December record high of $414.60.
The sell-off is part of a broader rotation by investors away from the largest technology companies due to concerns about the sustainability of the hundreds of billions of dollars being committed to developing artificial intelligence capabilities.
Broadcom, the seventh-most valuable company in the S&P 500 with a market capitalisation of about $1.5 trillion, is a chipmaking partner with Alphabet Inc. and other AI giants, making it a key beneficiary of the ongoing surge in AI infrastructure spending.
(With inputs from Bloomberg)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
