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Broadcom (NASDAQ: AVGO) Set To Benefit As Custom Silicon The Future For AI

Analyst Team trader
Updated 4 Jul 2024

The realm of artificial intelligence (AI) is undergoing rapid evolution, and with it, the landscape of AI-related hardware. As companies seek to gain an edge with powerful computing capabilities, elite investors are turning their attention to application-specific integrated circuits (ASICs), specialised silicon chips designed for exclusive tasks.

Investments in AAA-rated companies like Broadcom (NASDAQ: AVGO) signal a strong belief that ASICs will be a crucial piece in the AI hardware boom.

At the forefront of the AI semiconductor sector has been Nvidia (NASDAQ: NVDA), a tech giant renowned for its powerful graphics processing units (GPUs). Nvidia's GPUs have been instrumental in advancing AI technologies, contributing significantly to the company's position as a market leader .

Another notable mention in the thriving memory chip sector is Micron Technology (NASDAQ: MU). The company has been pinpointed as a promising investment due to its potential benefits from the AI revolution. Memory chips are essential for the extensive data processing tasks that AI workloads demand, making companies like Micron integral to the AI ecosystem .

A standout in this bustling market is Broadcom (NASDAQ: AVGO), an AAA-rated company recognized for its strides in custom silicon. ASICs are increasingly seen as a smart investment due to their potential to provide explosive growth in a niche yet rapidly expanding market within the AI arena .

Performance leaps in GPUs have been significant, with Nvidia's latest chip, Blackwell, being acclaimed for its fivefold increase in power over its processor, Hopper. Such developments showcase the continuous push for more efficient and powerful computational resources in AI .

Morgan Stanley's estimation that the custom AI chip market will witness a compound annual growth rate of 42% by 2027 underlines the immense growth potential of this sector. ASICs' inherent efficiency and performance advantages, when tailored for specific AI tasks, offer compelling arguments for their adoption over general-purpose counterparts like GPUs .

Pioneers such as Alphabet (NASDAQ: GOOG) and Apple (NASDAQ: AAPL) have embraced ASIC technology, with the Tensor Processing Unit (TPU) and the new Apple Intelligence models illustrating the practical benefits and advancements achievable through the use of custom silicon in accelerating specific AI workloads .

Broadcom's trajectory is particularly noteworthy, having won Google's next-generation ASIC initiative. Broadcom's strategic wins in securing new ASIC customers are projected to drive its revenue to $10 billion or more by 2025. Such achievements only strengthen the case for its favorable position in the custom silicon market .

Furthermore, Broadcom presents an appealing alternative for investors seeking diversification from Nvidia. The company's 53% increase in share price and a lower enterprise-value-to-Ebitda multiple compared to Nvidia highlight its potential as a safer investment choice in this competitive space .


As the demand for specialised AI computation grows, ASICs represent a shining facet of the semiconductor industry. With influential investors backing companies like Broadcom, the rise of custom silicon could mark a significant shift in the AI revolution, signaling a smart-money trend that is rapidly gaining traction.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.