Broadcom is firing on all cylinders, and Wall Street can’t get enough of the stock
Broadcom shares hit an all-time high during Monday’s trading session after another encouraging sign emerged that the company’s custom chips are very popular in the AI scene. The latest development comes from tech website The Information, which says Microsoft may want to move its custom chip business from Marvell Technology to Broadcom. The report is the latest in a recent string of good news for Broadcom, which reported quarterly earnings after the close on Thursday. Shares of Marvell were understandably falling more than 7%. A note from Benchmark also weighed on Marvell shares; analysts here noted with “a high degree of conviction” that Amazon may want to move development of future generations of Trainium chips from Marvell to AIchip, a Taiwanese designer. Taken together, Broadcom shareholders should be pleased with the company’s standing in the custom AI market as custom silicon emerges as a rival to Nvidia’s all-purpose AI chips, the gold standard for running AI workloads. At the same time, Marvell’s weakening position strengthens Broadcom’s position as the company of choice for custom chips. The Information report on Microsoft follows the success of Google’s tensor processing units, which were co-developed by Broadcom. TPUs have been praised in recent weeks following the launch of Gemini 3, the latest large-language model from Alphabet’s Google. Gemini 3, which topped the app leaderboards, was trained and run entirely on Google’s custom TPUs. A few weeks ago, The Information reported that Meta Platforms was considering using Google’s TPUs for its data centers in 2027. AVGO YTD mountain Broadcom YTD While it’s great to watch Broadcom’s share price rise, we don’t like it when a stock enters an earnings release because it signals high expectations. But we understand the move because all this news has made it clear that Broadcom’s custom silicon business is poised for more earnings. We don’t expect to hear much about these last two developments on the post-earnings call. However, we suspect that conversations about custom chip demand will center around the attention Broadcom has received following the launch of Gemini 3. Apart from custom chips, there will be high interest in Broadcom’s networking business, which has seen incredible growth in the past year, given the increasing need for high-bandwidth networking solutions resulting from the explosion in AI adoption, especially with the introduction of reasoning models and agency solutions. On the legacy front, given that Apple is the company’s primary wireless customer, we expect to see some gradual recovery, thanks in part to seasonality as the company’s wireless revenues are tightly tied to the iPhone sales cycle. As for software, we continue to expect strong growth and margin performance driven by VMware and will be interested to hear about additional synergies and cross-selling opportunities the team is working on. (Jim Cramer’s Charitable Trust is long AVGO, MSFT, AMZN, META. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
