Broadcom Just Locked Down Its AI Chip Supply Through 2028

MarketDash

Mar 6, 11:01 AM

The semiconductor giant has secured the high-bandwidth memory and manufacturing capacity it needs for the next four years, betting big on continued AI demand from tech's biggest players.

Key Points

Broadcom has secured its supply of high-bandwidth memory (HBM) and advanced manufacturing capacity at TSMC through 2028, a major move to avoid future shortages.
The company's AI revenue surged 106% year-over-year to $8.4 billion last quarter, and CEO Hock Tan expects AI chip revenue to exceed $100 billion next year.
Major Wall Street analysts, including from JPMorgan and Goldman Sachs, raised their price targets on Broadcom following strong earnings and guidance, citing clear visibility into long-term AI demand.
Broadcom is a key player in custom AI chips (ASICs) for hyperscalers like Google, Meta, Microsoft, and Amazon, offering an alternative to standard GPUs from Nvidia and AMD.
The company's strategic supply chain lock-up and strong customer base have analysts projecting it could generate over $100 billion in AI revenue by fiscal 2027.

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So, you know how everyone's worried about whether there will be enough AI chips to go around? Broadcom Inc. (AVGO) just decided to stop worrying and buy the whole factory. Well, not buy it, but lock it down.

The semiconductor giant announced it has secured the high-bandwidth memory (HBM) and advanced-node manufacturing capacity it needs at Taiwan Semiconductor Manufacturing Co. (TSM) to support its AI chip production all the way through 2028. That's a four-year supply chain handcuff, effectively easing a big industry headache about limited HBM supply and constrained TSMC production lines.

Think of it as Broadcom calling dibs on the best table at the restaurant for the next four years, while everyone else is still trying to get a reservation. The company said it locked in the required volumes in advance as demand for AI infrastructure from big tech companies just keeps accelerating. This move, reported by Chosunbiz, is a classic power play in a tight market.

Broadcom has been expanding rapidly in the market for application-specific integrated circuits (ASICs). These are custom chips built for a specific task, unlike the general-purpose graphics processing units (GPUs) that Nvidia Corp (NVDA) and Advanced Micro Devices, Inc (AMD) are famous for. And who's ordering these custom chips? Oh, just a few small companies you might have heard of: Alphabet Inc's (GOOGL) Google, Meta Platforms Inc. (META), Microsoft Corp (MSFT), and Amazon.com Inc (AMZN).

These tech giants are working with Broadcom to build silicon tailored to their own AI models instead of relying solely on off-the-shelf GPUs. It's the semiconductor equivalent of getting a bespoke suit instead of buying one off the rack.

The AI Money Is Flowing In

All this custom work is translating into serious revenue. CEO Hock Tan said Broadcom expects AI revenue from its chip business to exceed $100 billion next year. Let that number sink in for a second.

The company's latest results showed this momentum isn't just theoretical. Fiscal first-quarter revenue hit $19.31 billion, up 29% year over year. The star of the show was AI revenue, which rocketed 106% to $8.4 billion. When a segment more than doubles in a year, people tend to notice.

Wall Street Takes Notice and Raises the Bar

Notice they did. After Broadcom beat first-quarter estimates and issued that strong guidance, Wall Street analysts promptly raised their price targets, like fans holding up a "10" scorecard.

JPMorgan analyst Harlan Sur reiterated an Overweight rating and lifted his price forecast to $500 from $475. He cited strong momentum in Broadcom's AI segment and growing demand for AI networking, which he expects to account for 40% of AI revenue in the second quarter. Sur thinks this performance could put Broadcom on track to generate more than $65 billion in AI revenue in fiscal 2026 and potentially cruise past $100 billion in fiscal 2027.

Over at Goldman Sachs, analyst James Schneider maintained a Buy rating and raised his price target to $480 from $450. He pointed to management's guidance and commentary that suggest strong long-term AI demand and, crucially, improved visibility into future revenue. In the world of chip manufacturing, visibility is everything.

Rosenblatt analyst Kevin Cassidy also maintained a Buy rating and joined the $500 club with his new price forecast. He highlighted stronger visibility into 2027 demand and Broadcom's leadership position in both AI ASICs and networking.

Not to be left out, Benchmark analyst Cody Acree reiterated a Buy rating with a $485 price target. His reasoning neatly sums up the bullish case: the company's guidance, its expanding base of large platform customers, and now its secured supply chain all strengthen confidence in Broadcom's AI growth story for years to come.

In early trading Friday, Broadcom shares were down a slight 0.50% at $331.10. Sometimes after a big run-up and a wave of positive news, the market takes a breath. But with supply locked down through 2028 and the biggest names in tech as customers, Broadcom seems to have built itself a very comfortable seat at the AI table.