Broadcom, Marvell Face Stock Dips Despite High Hopes in AI Chip Sector

Zinger Key Points
  • Broadcom eyes $10 billion in AI chip sales, yet stock dips on steady annual forecast.
  • Marvell disappoints with below-expectation revenue forecast, shares fall 6% after-hours.

Broadcom Inc AVGO announced it anticipates $10 billion in AI-related chip revenue this year but saw its stock drop after its yearly forecast underwhelmed investors. 

Broadcom reported a quarterly net revenue of $11.96 billion, topping analyst predictions of $11.71 billion and EPS of $10.99 per share, which beat the analyst consensus estimate of $10.29.

Despite a significant AI revenue increase and a 26% stock rally in 2024 driven by AI optimism, Broadcom’s unchanged $50 billion annual revenue forecast led to a slight stock dip in after-hours trading, Reuters reports.

The company’s AI revenue quadrupled to $2.3 billion in the fiscal first quarter, balancing a cyclical slowdown in enterprise and telecom sectors. Broadcom’s broad portfolio includes significant software growth, surpassing estimates, with infrastructure software revenue surging 153% to $4.57 billion. 

Marvell Technology Inc MRVL was also disappointed with a revenue forecast below expectations, leading to a 6% stock decrease in after-hours trading. It sees first-quarter revenue of $1.15 billion, plus or minus 5%, versus estimates of $1.371 billion. 

Marvell said fourth-quarter revenue increased 1% year-over-year to $1.427 billion, surpassing the consensus estimate of $1.42 billion. The chip designer reported EPS of $0.46, which was in line with analyst estimates. 

Marvell also boosted its share buyback by a $3 billion share repurchase program to approximately $3.3 billion.

Both firms are in the spotlight for their potential to benefit from the AI boom, providing networking chips crucial for AI data processing and collaborating with clients on custom AI chip designs. 

Broadcom CEO Hock Tan revealed that $7 billion of AI revenue would stem from custom chip designs for two major clients, speculated to be Alphabet Inc GOOG GOOGL Google and Meta Platforms Inc META

Analysts have touted Broadcom as a significant AI beneficiary apart from key players like Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD.

Investors can gain exposure to Broadcom via Amplify ETF Trust Amplify Cybersecurity ETF HACK and Invesco Next Gen Connectivity ETF KNCT.

Price Actions: AVGO shares traded lower by 1.78% at $1,382.00 premarket on the last check Friday. MRVL shares traded lower by 6.15% at $79.86.

Also Read: Nvidia Tops in Popularity Among S&P 500 Semiconductor Stocks, Analyst Sees Room for Growth

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo via Shutterstock

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