Broadcom Shares Soar 16% on $10B OpenAI AI Chip Deal
The semiconductor giant's stock added over $200 billion in market value after confirming a partnership to develop custom AI accelerators for OpenAI.
Broadcom Inc. (AVGO) shares surged as much as 16% after it was revealed the company is partnering with OpenAI to develop custom artificial intelligence chips in a deal valued at over $10 billion. The rally added more than $200 billion to Broadcom's market capitalization, signaling strong investor confidence in the company's expanding role in the booming AI sector.
The partnership aims to produce bespoke AI accelerators for OpenAI, with the first shipments expected to begin in 2026. This strategic move is designed to reduce OpenAI's reliance on Nvidia, the current market leader for AI chips, and to create processors specifically tailored to its demanding AI workloads. , a development that positions it as a significant competitor in the lucrative AI hardware space.
Broadcom's CEO, Hock Tan, alluded to the deal during a recent earnings call, mentioning that a new, unnamed customer had placed substantial orders for its custom accelerator business. This new client, now understood to be OpenAI, is expected to "significantly" boost Broadcom's AI revenue outlook for fiscal year 2026. The news had a ripple effect across the market, with Nvidia's shares falling 4.3% on concerns of increased competition. This collaboration is part of a broader trend where tech giants like Google, Amazon, and Meta are to optimize AI performance and control costs.
The deal underscores the immense demand for specialized processors capable of handling the intensive computing power required by advanced AI models. By securing this high-profile partnership, as a key enabler of the AI revolution, challenging the existing market hierarchy and setting the stage for a new phase of competition and innovation in the semiconductor industry.