Broadcom could be a winner from Arm's push into making its own chips: JPM
Feb. 15, 2025 8:00 AM ET
By: Chris Ciaccia, SA News Editor
As Arm Holdings (NASDAQ: ARM) pushes further into designing its own chips and signing up clients such as Meta Platforms ( META), one beneficiary of the initiative could be the company that actually makes the chips: Broadcom (NASDAQ: AVGO).
Companies such as Google ( GOOG) ( GOOGL), Microsoft ( MSFT), Meta and Amazon ( AMZN) are increasingly using custom application specific integrated circuits, or ASIC, for their AI accelerators due to power and compute efficiency needs. As such, Broadcom, which has a large ASIC business, is likely to be a big beneficiary, J.P. Morgan analyst Harlan Sur said.
“With the stepped-up focus on compute efficiency (thanks to DeepSeek), we can see these AI ASIC programs being accelerated to further augment compute efficiency and drive a more aggressive cost/compute curve,” Sur wrote in a note to clients. Sur has an Overweight rating and $250 price target on Broadcom.
Those four hyperscalers have helped boost Broadcom's custom ASIC business, but that hasn't stopped the Hock Tan-led company from expanding its customer base. There is the belief that Broadcom may be working with OpenAI on its own processors (which could come as soon as next year), and now Arm — which is still majority owned by SoftBank ( OTCPK:SFTBY) — Sur added.
“... SoftBank/ARM, which has a strategy to develop an AI XPU/CPU chip family that will power SoftBank’s datacenters/ telco networks, and large AI initiatives like project Stargate/Cristal (SoftBank, ARM, OpenAI, Oracle partnership) and the recently announced SoftBank OpenAI JV (“SB OpenAI Japan”), and may potentially even go after the off-the-shelf merchant AI GPU/XPU market opportunity that NVIDIA ( NVDA) dominates today,” Sur posited.
“All totaled, if our belief in Broadcom’s program win is correct, we estimate the compute requirements of SoftBank alone could drive a 1M XPU/cluster silicon [serviceable addressable market] opportunity for Broadcom ($20-$30B potential revenues) over the next few years,” Sur added
Additionally, with SoftBank/Arm likely putting their project “Izanagi” in Broadcom's hands, this could wind up being incremental to Broadcom's recent forecast of a serviceable addressable market between $60B and $90B by fiscal 2027, Sur explained. |
