One of the kings of the semiconductor industry, Broadcom (NASDAQ: AVGO), has a new product on the way. However, it is not one of the company’s vaunted custom AI accelerators, which it refers to as XPUs. Broadcom also has an extensive business in developing chipsets for Ethernet network switching and routing. These products dictate the flow of information within a data center, acting like directors of data traffic.
This ties into a company like Arista Networks (NYSE: ANET). Arista makes actual Ethernet switches and routers. The company’s strong product line in this space has allowed it to amass a large customer base among AI data center operators. One key component needed for building Arista’s switches and routers is the chips used inside them. Arista buys these chips from Broadcom. Arista noted in a Jun. 2024 press release that its 7060X6 AI Leaf switch uses Broadcom’s Tomahawk 5 chip. Now, Broadcom is getting ready to release Tomahawk 6.
So, what exactly are Broadcom’s networking chips, and what advancements is Broadcom making through Tomahawk 6? When will Broadcom release Tomahawk 6, and can it become a significant growth driver for the company?
Broadcom’s Networking Chips and the Tomahawk 6 Advancement
Broadcom has three main lines of networking chips. Its Tomahawk line is specifically designed for hyperscale data center applications. The company also has the Trident and Jericho networking chips, which are for traditional business networking and service provider networking. Service providers refer to internet service providers and telecom companies. However, Broadcom has also developed the Jericho 3 AI chip for data center applications.
Broadcom’s focus on making different networking chips for different domains gives it an advantage over some other competitors. It helps customize functionality to each customer’s use case, creating an optimal solution for each.
A key feature of networking chips is their throughput, which measures the amount of data that a networking chip can process and transmit. As processing chips become faster, hyperscalers also need to improve networking chip throughput to keep up.
Broadcom has notably been able to double the throughput of each of its Tomahawk chips every two years, in line with the progress expected through Moore’s Law. Tomahawk 5 had a throughput of 51.2 terabits per second (Tb/s). Tomahawk 6 nearly doubles this, with 100 Tb/s throughput. Tomahawk 6 represents a significant advancement, allowing for significantly more data to be transmitted every second.
Tomahawk 6: Key to Capturing Tens of Billions in Market Opportunity
Broadcom says that it has “tapped out” its Tomahawk 6 chip. This indicates that the design phase has concluded and that the manufacturer is now producing the chip. Broadcom says it will be sending out samples to its customers over the next few months. It took Tomahawk 5 around seven months after initial sampling until it started shipping in volume. So, it is unlikely that Tomahawk 6 will contribute to Broadcom’s revenue in 2025.
[content-module:MarketRank|NASDAQ: AVGO]However, Tomahawk 6 is important to the company’s longer-term growth prospects. Broadcom has three hyper-scale customers who want to have 1 million XPU clusters by the end of 2027. Increasing Tomahawk 6's throughput is vital to allowing hyperscale customers to reach these lofty computing deployment goals. The increased processing power will generate more data that the networking chips need to transmit.
Broadcom sees these three customers alone generating a total serviceable addressable market (SAM) of $60 billion to $90 billion in fiscal 2027. That is equal to between 110% and 165% of the company’s revenue over the past 12 months. Although, it is important to note that Broadcom is not necessarily expecting to capture all of that opportunity.
However, it does think it can capture a significant amount of it. Broadcom says the AI revenue mix between its XPUs and networking chips is approximately 70/30. This shows how networking is by no means a small contributor to Broadcom’s AI business and how Tomahawk has the potential to help drive growth.
AVGO: Don’t Forget About Networking in This AI Growth Story
All in all, Broadcom’s next-gen Tomahawk 6 product ties in with its whole strategy to support AI hyperscalers. Broadcom notably has multiple avenues to benefit from the proliferation of AI, including its processing and networking chips.
The massive SAM the company sees among just three customers in the not-so-distant future shows that Broadcom's overall growth story remains strong. MarketBeat tracks 27 Wall Street analysts with ratings on Broadcom, with 25 buys and 2 holds.
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