Broadcom CEO Hock Tan Forecasts $1 Trillion Valuation
date
Dec 17, 2024
damn
language
en
status
Published
type
News
image
https://www.ai-damn.com/1734439140071-202304201631244520_0.jpg
slug
broadcom-ceo-hock-tan-forecasts-1-trillion-valuation-1734439153729
tags
AI Chips
Broadcom
AI Accelerators
Hyperscale Customers
VMware
summary
Broadcom CEO Hock Tan predicts a significant expansion in the AI chip market, with the company's valuation surpassing $1 trillion for the first time. He expects the serviceable addressable market for AI to reach between $60 billion and $90 billion by 2027, driven by substantial demand from major customers.
Broadcom CEO Hock Tan Forecasts Significant Growth in AI Market
During a recent earnings call, Broadcom CEO Hock Tan expressed an optimistic outlook regarding the future of the AI chip market, predicting notable revenue growth in this sector by 2027.
mage Note: Image generated by AI, provided by Midjourney
Tan indicated that Broadcom's serviceable addressable market (SAM) for AI-related products and networks is projected to be between $60 billion and $90 billion. He noted that the company is currently working with three major hyperscale customers, with two more potential clients in advanced discussions, who plan to procure millions of Broadcom's AI accelerators (XPU) to enhance their AI workloads.
He emphasized that achieving these developments is a long-term process that will span several years. By 2027, Tan anticipates these three customers will deploy one million XPU clusters within the same architecture. This announcement contributed to a 24% increase in Broadcom's stock price on the same day, resulting in the company surpassing a market valuation of $1 trillion for the first time.
Revenue Growth and VMware Acquisition
In discussing Broadcom's overall performance, Tan mentioned that revenue from traditional products saw an 11% year-over-year increase. He highlighted that the recent $69 billion acquisition of VMware has significantly impacted the company's financials, contributing $3.85 billion in revenue in the last quarter, leading to an overall revenue increase of 51%. Tan stated that since the acquisition, he has successfully halved VMware's operating costs from $2.4 billion to $1.2 billion per quarter, resulting in an increase in profit margin from 30% to 70%.
Moreover, Tan reported that VMware has installed 21 million CPU cores in the last quarter, a rise from 19 million cores in the previous quarter. Among the company’s top 10,000 customers, approximately 4,500 have transitioned their virtualization environments to Broadcom's VMware cloud infrastructure.
Market Challenges Ahead
Despite these positive developments, a recent forecast from market research firm Forrester suggests that VMware customers are expected to reduce their deployments by 40% in the upcoming year. This trend is attributed to a growing number of customers opting to migrate to public clouds, on-premises alternatives, and new architectures. During the earnings call, Broadcom's CFO Kirsten Spears noted that the company will cease to disclose virtualization business revenue separately, opting to merge it with revenues from mainframe and other traditional software businesses.
Key Highlights
The earnings call underscored several key points regarding Broadcom’s future and market dynamics:
- Broadcom expects the serviceable addressable market for AI to reach $60 billion to $90 billion by 2027.
- The company's market value has exceeded $1 trillion for the first time, fueled by rising demand for AI chips.
- Broadcom's overall revenue has increased by 51% following the acquisition of VMware, alongside significant reductions in operating costs.
Key Points
- Broadcom anticipates a SAM for AI of $60 billion to $90 billion by 2027.
- The company's valuation has surpassed $1 trillion, driven by demand for AI chips.
- Revenue growth of 51% attributed to the VMware acquisition and cost reductions.