Wells Fargo analysts have emphasized that the recent partnership between OpenAI and Broadcom (NASDAQ:AVGO) for the development of AI-optimized chips is a significant endorsement of Broadcom's expertise in custom AI silicon.
According to a report from The Information, OpenAI is collaborating with Broadcom to create a new AI chip, marking a substantial recognition of Broadcom's prowess as a premier provider of custom AI silicon (XPU) solutions.
Broadcom's shares gained following the news, underscoring the market's positive reaction to this development. Analysts highlighted this partnership as "further validating Broadcom's position as the leading partner for internal AI-optimized silicon development."
The report also mentioned that Richard Ho, a former Google employee who worked on Google's Tensor Processing Unit (TPU), is leading OpenAI's chip-focused team.
The development of the new AI chip is expected to take several years, with production likely commencing in 2026 at the earliest. Broadcom is already a key partner for Google's TPUs, and its AI silicon customer base includes major players like Google and Meta.
Wells Fargo said the company's projections indicate that custom AI XPUs will make up approximately 70% of its anticipated $11 billion+ AI semiconductor revenue in fiscal 2024.
The bank notes that Broadcom's slides from their March Enabling AI Infrastructure event illustrate plans for up to seven new custom XPUs shipping between 2025 and 2026. This diversification and expansion into custom AI silicon solidify Broadcom's leading position in the market.
Additionally, analysts highlighted that OpenAI's founder and CEO, Sam Altman, has ambitious plans to expand chip manufacturing capacity, potentially raising up to $7 trillion in capital, further highlighting the scale of this endeavor.