What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ: AVGO) jumped 3.9% in the morning session after it continued a rally sparked by the announcement of a massive $10 billion AI chip order and a strong quarterly earnings report.
The positive momentum follows the company's report late last week, where fiscal third-quarter revenue grew 22% year-over-year to $15.95 billion, beating expectations. The growth was driven by Broadcom's AI-related sales, which climbed an impressive 63% to $5.2 billion. Adding to the bullish sentiment, the company revealed the blockbuster $10 billion order for its custom AI chips came from a new customer, which sources have identified as OpenAI. Broadcom also raised its sales outlook, guiding for fourth-quarter revenue of approximately $17.4 billion, reinforcing its crucial role in the booming AI infrastructure market.
After the initial pop the shares cooled down to $348.13, up 3.9% from previous close.
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What Is The Market Telling Us
Broadcom’s shares are very volatile and have had 25 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 9.2% on the news that the company reported solid second-quarter financial results, added a new AI customer, and provided an optimistic revenue forecast for the upcoming quarter, signaling healthy business momentum. The company posted second-quarter revenue of $15.95 billion, a 22% increase year-over-year that was in line with Wall Street expectations, while its adjusted earnings of $1.69 per share narrowly beat analyst estimates. Broadcom also fueled investor optimism by guiding for third-quarter revenue of around $17.4 billion, surpassing consensus forecasts. Beyond the headline numbers, the report highlighted strong operational performance, including a significant improvement in inventory management and a rise in operating margin to 36.9% from 29% in the same quarter last year. Notably, the company added during the earnings call that it secured "a $10B order from a fourth XPU customer (we believe this is OpenAI)." This combination of a solid earnings report, strong forward guidance, and improved profitability metrics bolstered investor confidence in the company's outlook.
Broadcom is up 50.1% since the beginning of the year, and at $348.13 per share, has set a new 52-week high. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $9,931.
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