FILE PHOTO: A Broadcom logo appears in this illustration taken August 25, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
(Reuters) -Broadcom shares jumped 15% on Friday after the chipmaker unveiled a blockbuster $10 billion AI chip order from a new customer, fueling optimism around its ability to benefit from the generative AI race.
The deal solidifies the company's role as a leading custom chip provider amid Big Tech's push to diversify beyond Nvidia's pricey and supply-constrained artificial intelligence processors.
"While we agree Broadcom is taking more share, we believe the AI pie could just be getting bigger," BofA Securities analysts said.
The latest chip order could help reinforce investors confidence in the AI rally, which has shown signs of sputtering this year. Broadcom's shares are 32% higher this year after more than doubling in value last year.
If gains hold, the chipmaker would add more than $200 billion to its $1.44 trillion market valuation, after crossing the trillion-dollar valuation last year.
Broadcom's latest deal has fueled speculation that OpenAI is the unnamed customer. Analysts at J.P.Morgan, Bernstein and Morgan Stanley said the timing and scale of the deal suggest OpenAI is likely the new customer.
Reuters reported last year that OpenAI was working with Broadcom to build its first in-house chip.
OpenAI has so far used chips from Nvidia and AMD to power its AI models.
Shares of Nvidia and its smaller rival AMD, which provide off-the-shelf chips, fell 2% and 5% respectively.
Tech giants like Microsoft, Amazon.com and Meta Platforms - among Nvidia's largest customers- are all developing in-house chips.
While Broadcom does not identify the cloud companies it is developing custom chips for, analysts believe Alphabet's Google and Facebook-owner Meta are among its existing customers.
Bernstein analysts said with this new customer, AI sales in fiscal 2026 could be well over $40 billion, up from expectations of $30 billion last quarter.
Broadcom said it expects "significantly improved" AI revenue growth in fiscal 2026.
Adding to momentum, CEO Hock Tan announced he would stay at the helm for at least five more years. Tan, who was 73 as of Broadcom's March proxy filing, has led the chipmaker for nearly two decades and steered it to the center of the AI boom.
(Reporting by Rashika Singh, Akash Sriram and Arsheeya Bajwa in Bengaluru; Editing by Mrigank Dhaniwala and Arun Koyyur)
