Broadcom and OpenAI Forge Massive AI Chip Partnership, Reshaping Data Center Landscape

How Broadcom's big OpenAI deal fits into the data center boom and what it means for the AI trade

Kicking off the week with a bang, OpenAI announced another massive data center buildout partnership. This time with Club name and custom semiconductor industry leader Broadcom. Shares of Broadcom soared as much as 10.7% on Monday after the two companies revealed that they have been working for 18 months on custom-designed chips optimized for inference, the process of running AI models on a day-to-day basis. Deployment of 10 gigawatts of the co-designed chips, which will be networked through Broadcom's Ethernet stack, is set to start late next year. Broadcom stock has gained roughly 54% year to date. The news is the latest in a series of monster deals over the past few weeks. On Sept. 22, OpenAI struck a deal for 10GW of Nvidia-based data centers . Two weeks later, OpenAI made 6GW deal with Nvidia competitor Advanced Micro Devices . Both of those deals, along with Monday's Broadcom announcement, follow the massive $500 billion Stargate Project announced by OpenAI, Softbank, and Oracle . Stargate is targeting 10GW of capacity but may exceed that initial goal over time as the initiative expands internationally, starting with Stargate UAE . Adding it all up, Open AI has announced roughly 36GW of data center capacity since the beginning of the year, with 26GW worth of deals coming in the past three weeks alone. To put that into perspective, the Hoover Dam's power-generating capacity is about 2GW, which is enough to power nearly 1.8 million homes for an entire year. So, what we're talking about here is the equivalent of about 18 Hoover Dams or enough energy to power more than 31 million homes for an entire year. Though the build-out of all these projects will take several years, OpenAI co-founder and president Greg Brockman, speaking with Jim Cramer on CNBC shortly after the news was announced, made clear that these projects, which combined represent the largest industrial undertaking in history, are needed to get ahead of a clear "avalanche" of demand. Asked if he meant that OpenAI was hoping to see immense demand, Brockman stressed it is not about hope but rather that the company is "currently being swept along by the avalanche." As an example, Brockman said that while ChatGPT was the fastest-growing consumer app in history, the company's new video generation app, Sora, is now growing even faster. ChatGPT, which was launched by Microsoft -backed OpenAI in late 2022, quickly went viral. The chatbot brought generative AI to the masses and launched the current boom in developing and deploying the technology. According to Broadcom's release , "By designing its own chips and systems, OpenAI can embed what it's learned from developing frontier [or cutting edge] models and products directly into the hardware, unlocking new levels of capability and intelligence. Brockman said on CNBC that it will also reduce the cost of running AI models. OpenAI's Brockman appeared on CNBC alongside Charlie Kawwas, president of Broadcom's semiconductor solutions group. CNBC's David Faber asked Kawwas during Monday's interview if OpenAI was the fourth new major custom-chip partner that Broadcom disclosed but didn't name during last month's post-earnings conference call. Kawwas said , "I would love to take a $10 billion PO [purchase order] from my good friend Greg [Brockman]; he has not given me that PO yet, so I hope that answers the question." So, this means that there is another major buyer out there looking to stand up significant data center computing power. While we can't say for sure who it is, analyst Ben Reitzes of Melius Research speculated last week that the fourth Broadcom customer may also be Amazon -backed Anthropic. Jim will ask Broadcom CEO Hock Tan, among other things, during Monday's interview for "Mad Money." The Broadcom-OpenAI news is just another example of how early we still are in the AI trade. While we are certainly seeing areas of froth and bubble-like activity in some parts of the market - Jim cautioned against some of those names in his Sunday column - we don't think that is the case for names like Broadcom and Nvidia, nor is it the case for the highly profitable megacaps driving much of the money behind the trade. Even at these levels, we think names like Broadcom and Nvidia still trade at reasonable levels given their growth outlooks. In terms of Nvidia's deal with OpenAI, Nvidia CEO Jensen Huang, at the time, said this one deal was equal to the entirety of the company's 2025 revenue. Jensen told Jim last week at the Club's October Monthly Meeting that "partnership with OpenAI is really incremental to all the work that we have done with Azure, OCI, and CoreWeave." Azure is Microsoft's cloud. OCI stands for Oracle Cloud Infrastructure. CoreWeave, another Nvidia-backed company, rents out computing power run on Nvidia chips. Lastly, we would be remiss if we didn't call out that with great power demand comes the need for great companies that enable power generation. Jensen told Jim last week that without meeting America's increasing energy demand, driven in large part by AI, there is no industrial growth, without industrial growth, there's no stock price growth, there's no economic growth, there's no national security." For the Club, that means GE Vernova , up more than 7% on Monday, and Eaton , up roughly 2.5%. GE Vernova makes natural gas turbines that can and are being hooked up to data centers to make electricity when the power grid is overtaxed. The company also builds small modular nuclear reactors, though meaningful additional nuclear power is still a few years away. Eaton, on the other hand, makes power management systems and components that enable data centers to run more efficiently, with greater uptimes and scalability. Eaton's cooling and airflow management solutions are also at the heart of maintaining environmental conditions in the data center. (Jim Cramer's Charitable Trust is long AVGO, NVDA, MSFT, AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Broadcom's 10GW AI Deal With OpenAI Could Generate Up To $300 Billion Revenue, Analysts Highlight Growth From Custom Silicon And Networking Solutions - Broadcom (NASDAQ:AVGO)

Broadcom (NASDAQ:AVGO) and OpenAI have launched a multi-year partnership to deploy 10 gigawatts of custom artificial intelligence silicon and rack-level systems, integrating compute Application-Specific Integrated Circuits (ASICs) along with Broadcom's Ethernet, Peripheral Component Interconnect Express (PCIe) and optical connectivity solutions. The deal expands beyond compute chips to networking silicon and server racks, positioning Broadcom to optimize performance and scale next-generation technologies. JP Morgan analyst Harlan Sur maintained an Overweight rating on Broadcom with a price forecast of $400. Goldman Sachs analyst James Schneider reiterated a Buy on Broadcom and raised the price forecast from $360 to $380. Also Read: Nvidia, Broadcom Highlighted As Sector Leaders Drive AI Growth Despite Buildout Risks: Analyst JP Morgan: Sur noted that Broadcom and OpenAI have partnered on a multi-year plan to deploy 10 gigawatts of custom AI silicon and rack-level systems, integrating compute XPU ASICs along with Broadcom's full portfolio of Ethernet, PCIe, and optical connectivity solutions. The analyst emphasized that the collaboration extends beyond compute chips to networking silicon and server racks, allowing Broadcom to optimize the stack for efficiency gains and maximize intelligence per watt. He said that next-generation technologies, including 3D chip stacking and co-packaged optics, could further scale computing capabilities. Sur estimated that each gigawatt of capacity could generate $25-$30 billion in revenue for Broadcom, implying a total potential revenue of $250-$300 billion for the 10 GW infrastructure. The analyst stated that deployment will commence in the second half of 2026 and is expected to be completed by 2029, with initial annual revenue projected to range from $70 billion to $90 billion over the four years. He also confirmed that the previously announced $10 billion order from Broadcom's last earnings call was likely for Anthropic, not OpenAI, involving Tensor Processing Unit (TPU) ASICs co-designed with Google and Broadcom for networking and rack-scale deployment. Sur reiterated Broadcom as his top semiconductor pick due to its diversified business model, strong margin profile, and exposure to growth trends in AI, data centers, and infrastructure. Goldman Sachs: Schneider highlighted Broadcom's strategic partnership with OpenAI to deploy 10GW of custom-designed AI accelerators and networking products. The analyst noted that deployments reinforced Broadcom's technology leadership in custom silicon. He also highlighted the company's strong position relative to its competitors, including Advanced Micro Devices' (NASDAQ:AMD) 6GW partnership with OpenAI, which involves a significant equity contribution. Schneider estimated that each gigawatt of AI datacenter deployment could generate $10-$15 billion in incremental revenue and contribute roughly $1.00-$1.50 in EPS for Broadcom. The analyst noted that the announcement signals growing adoption of custom silicon in the accelerator market and strengthens Broadcom's leadership in custom ASIC and Ethernet networking. He highlighted that AI networking and rack-level solutions for OpenAI present an underappreciated upside. Schneider reiterated Broadcom as a Buy, citing strong visibility into fiscal 2026/27, industry-leading margins, and expected stock outperformance. Price Action: AVGO stock was trading lower by 3.49% to $344.26 at last check on Tuesday. Read Next: Cisco Takes On Broadcom With Its Most Powerful Router Yet Photo: Shutterstock AVGOBroadcom Inc$346.83-2.77%OverviewAMDAdvanced Micro Devices Inc$222.192.67%Market News and Data brought to you by Benzinga APIs

Why Broadcom Stock Skyrocketed Monday Morning | The Motley Fool

The catalyst that sent the networking specialist higher was word of a new partnership for its custom artificial intelligence (AI) chips. In a joint press release that dropped Monday morning, Broadcom and OpenAI announced a strategic partnership to deploy 10 gigawatts of Broadcom's application-specific integrated circuits (ASICs). These AI accelerators, called XPUs, can be customized to handle specific tasks, making them more energy efficient. In some cases, ASICs are being used as a viable alternative to graphics processing units (GPUs) to provide the computational horsepower needed to fuel AI development. The announcement notes that OpenAI "will design the accelerators and systems, which will be developed and deployed in partnership with Broadcom." The pair also plan to deploy rack systems that incorporate the custom AI chips. This is the latest in a flurry of deals between OpenAI and high-profile AI chipmakers. In late September, the company announced a 10-gigawatt deal with Nvidia (NVDA 2.63%), which included a $100 billion investment in OpenAI. Just weeks later, the AI specialist announced a 6-gigawatt deal with Advanced Micro Devices (AMD 0.60%), which included an agreement that gave OpenAI the right to purchase up to 160 million shares of AMD, representing a roughly 10% stake in the company. By inking deals with all the biggest chipmakers, OpenAI will have a steady stream of cutting-edge AI chips to power its large language models. In conjunction with its fiscal 2025 third-quarter financial report, Broadcom announced the addition of a fourth large hyperscale customer, which many analysts believed was OpenAI. This deal helps illustrate Broadcom's growing influence in the AI chip space. Melius Research analyst Ben Reitzes has gone on record saying he believes Broadcom will eventually capture about 30% of the AI chip market. Yet for all that opportunity, Broadcom stock is attractively priced, with a price/earnings-to-growth (PEG) ratio of 0.38, when any number less than 1 is the standard for an undervalued stock.

Broadcom's OpenAI Bet: Big Revenue Optionality, Bigger Balance-Sheet Questions | Investing.com UK

Investors love a clean AI story, and Broadcom (NASDAQ:AVGO) just handed them one. A multi-year pact to co-develop OpenAI-designed accelerators and wire up next-gen clusters promises double-digit gigawatts of compute and a fresh lane beside Nvidia's (NASDAQ:NVDA) dominance. The market reaction was swift, sending Broadcom shares nearly 10% higher in a single session. Beneath the pop sits a tougher question: does the funding math behind OpenAI's buildout support Broadcom's margin structure and valuation over a full cycle, or are investors underwriting a capital stack as much as a product roadmap? The timing of the announcement intersects with a broader re-rating of AI-linked equities, as investors rotate back into growth themes amid expectations of a 2025 Fed easing cycle. AI infrastructure spending has become one of the few secular narratives capable of offsetting tighter liquidity conditions and slowing global demand, amplifying market sensitivity to any new data-center commitment. The headline is scale. OpenAI and Broadcom outlined deployments targeting roughly 10 gigawatts of accelerator capacity through 2029, with Broadcom supplying the networking backbone that competes with Nvidia's InfiniBand. The agreement begins ramping in the second half of 2026, placing the revenue curve squarely into the out-years of this cycle. Importantly, this is not an isolated order -- it fits into OpenAI's broader procurement spree aiming for about 26 gigawatts across multiple chip partners, a footprint that dwarfs New York City's peak summer demand. Broadcom gains privileged exposure to that spend and a showcase for its Ethernet-centric fabrics in very large clusters. The strategic catch is design specificity. Custom silicon and tightly integrated systems are powerful moats when the customer scales; they're also less transferable if the customer falters. Broadcom's CEO has already acknowledged that very large AI systems lift earnings while diluting gross margins -- a reminder that scale and mix effects can cut in opposite directions. If competitive dynamics intensify around pricing or qualification windows, the earnings leverage investors expect could soften even as revenue prints look impressive. OpenAI's ambitions are not subtle. The company is layering deals with AMD (NASDAQ:AMD) and now Broadcom while keeping Nvidia in the tent, and it has floated infrastructure plans requiring unprecedented power and capital. Reports peg 2025 revenue around $13 billion, with profitability not expected before 2029 and cumulative cash burn potentially exceeding $100 billion through that date. That is not a problem if revenue compounds, capital remains cheap, and partners execute; it becomes a risk if rates stay elevated, energy buildouts slip, or the AI demand curve normalizes. For markets, the power variable matters as much as capex. Ten gigawatts for one partnership and mid-20s gigawatts across arrangements imply grid, permitting, and generation constraints that sit outside semiconductor control. Any delay in energy availability becomes a de facto push-out of Broadcom's revenue recognition profile and a drag on expected return on invested capital. That's not a thesis killer, but it adds real timing risk to the bullish glide path investors have internalized. Broadcom isn't bidding into a vacuum. Nvidia continues to define the frontier, AMD is tying its own multi-gigawatt roadmap to OpenAI with financial incentives, and hyperscale buyers are experimenting with alternative custom paths. Google's work with MediaTek on TPU roadmaps signals that major customers will cultivate multiple supply lines. The net effect is healthy for OpenAI's bargaining power, but less so for any supplier's sustained pricing umbrella. Broadcom's operational discipline is an asset here, yet the structure of this customer set argues for persistent margin negotiation rather than one-way operating leverage. Investors have been willing to pay a premium multiple for Broadcom, reflecting execution across chips and software and consolidated gross margins above 70% during the VMware integration phase. The OpenAI tie-up extends that narrative but doesn't eliminate macro discipline. If long yields grind higher or credit spreads widen, the cost of OpenAI's external capital rises just as Broadcom leans into a long-dated, custom buildout. In that scenario, even strong backlog could be discounted more heavily. Conversely, an easing cycle that re-flattens the curve, combined with steady AI demand, would support both OpenAI's financing and Broadcom's multiple. Today's premium -- at times above Nvidia's forward ratio -- suggests the execution bar remains elevated. The bull case is straightforward: Broadcom converts OpenAI's scale into multi-year revenue, deepens its networking moat in AI clusters, and taps an incremental custom-silicon vector that diversifies exposure beyond Nvidia's cycle. The bear case is equally clear: timelines slip with power and permitting, funding tightens, competitive pricing trims margins, and design specificity limits reuse if OpenAI retrenches. Positioning-wise, the setup favors holders who can tolerate timing variance and monitor three leading indicators: For everyone else, the stock now embeds a lot of things going right at once. That's not a reason to sell -- but it's a reason to size with respect for the denominator. Over the next 12 months, Broadcom's trajectory will likely mirror sentiment around AI capex durability and U.S. monetary conditions more than quarterly earnings cadence. For now, the trade is less about profit delivery and more about conviction in the infrastructure super-cycle itself.

Broadcom stock price target raised to $430 from $410 at Mizuho on OpenAI deal By Investing.com

Investing.com - Mizuho raised its price target on Broadcom Limited (NASDAQ:AVGO) to $430.00 from $410.00 on Monday, while maintaining an Outperform rating following OpenAI's announcement of a custom ASIC partnership with the chipmaker. The semiconductor giant, currently valued at $1.68 trillion, has shown impressive momentum with 26 analysts recently revising their earnings estimates upward, according to InvestingPro data. The partnership represents OpenAI's third gigawatt-scale deal in the past four weeks, with the AI company planning to deploy 10 gigawatts of its custom ASIC, code-named Titan. Mizuho estimates this could potentially be worth $150-200 billion for Broadcom over multiple years. Initial production ramps for the custom chips are expected to begin in the second half of 2026, according to Mizuho's research note. The firm has conservatively raised its Broadcom AI revenue estimates to $40.4 billion for fiscal 2026, $64.5 billion for fiscal 2027, and $78 billion for fiscal 2028. Mizuho also highlighted additional tailwinds from Broadcom's networking business with SUE/Tomahawk products, conservatively estimating $15-20 billion in incremental revenue per gigawatt from combined AI ASIC and networking sales. OpenAI has announced approximately 26 gigawatts worth of deals in the past four weeks with Broadcom, NVIDIA, and AMD. Mizuho continues to list Broadcom as its "TOP PICK" in the semiconductor sector. In other recent news, Broadcom Inc. has announced a multi-year partnership with OpenAI to supply custom silicon and networking chips. This collaboration, which involves the development of 10 gigawatts of AI accelerators, is expected to begin deployment in the second half of 2026 and continue through the end of 2029. CFRA has praised this partnership, noting Broadcom's "extraordinary" visibility and pipeline. Wolfe Research has reiterated its Peerperform rating for Broadcom, highlighting the company's provision of Ethernet-based solutions for scale-up and scale-out capabilities in these rack systems. Melius Research has also reiterated a Buy rating, emphasizing the significant revenue potential from the OpenAI deal. Aletheia Capital has initiated coverage with a Buy rating and a $400 price target, projecting that Broadcom's AI revenue could double year-over-year in fiscal years 2026 and 2027. These developments underscore Broadcom's strategic focus on AI technology and its potential impact on future revenue streams. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Broadcom stock rises as CFRA praises OpenAI partnership and AI pipeline By Investing.com

Investing.com - Broadcom Inc (NASDAQ:AVGO), a prominent player in the semiconductor industry with impressive gross profit margins of 77%, saw its shares gain Monday after CFRA highlighted the company's "extraordinary" visibility and pipeline following a multi-year partnership announcement with OpenAI. According to InvestingPro data, the company maintains strong financial health with 26 analysts recently revising earnings expectations upward. The newly announced partnership will involve Broadcom supplying custom silicon and networking chips to OpenAI, with deployment expected to begin in the second half of 2026 and continue through the end of 2029. With revenue growth of 28% over the last twelve months and an EBITDA of $32.75 billion, Broadcom appears well-positioned to execute this significant contract. According to CFRA's analysis, the two companies will collaborate to build 10 gigawatts of AI infrastructure, contributing to OpenAI's broader pursuit of over 30 gigawatts of new capacity in the coming years -- an initiative that could represent more than $1 trillion in spending. Get deeper insights into Broadcom's growth potential and 20+ additional ProTips with a InvestingPro subscription, including exclusive access to comprehensive Pro Research Reports. CFRA noted that Broadcom's previously announced $10 billion new customer was not OpenAI as many had speculated, with Broadcom's President of Semiconductor Solutions suggesting this distinction during a CNBC appearance. The research firm maintained its positive outlook on Broadcom, stating the company is "well-positioned to benefit from the massive AI infrastructure build from existing/new clients, with upside from additional prospects to place large-scale orders in the coming years." In other recent news, Broadcom Limited has announced a significant multi-year collaboration with OpenAI to develop and deploy 10 gigawatts of custom AI accelerators. This partnership is expected to begin deployment in the second half of 2026 and continue through the end of 2029. Wolfe Research reiterated its Peerperform rating for Broadcom, acknowledging the company's substantial deal with OpenAI. Melius Research maintained its Buy rating and set a price target of $415, emphasizing the potential revenue boost from the OpenAI agreement. Aletheia Capital initiated coverage on Broadcom with a Buy rating and a $400 price target, predicting that the company's AI revenue will double year-over-year in 2026 and 2027. Bernstein SocGen Group also reiterated an Outperform rating and a $400 price target, citing strong demand in the compute sector and confidence in Broadcom's growth trajectory. These developments reflect growing interest and investment in AI technologies, underscored by Broadcom's strategic partnerships and analyst support. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.