On November 2, 2017, President Donald Trump introduced Broadcom CEO Hock Tan during a ceremony in the Oval Office of the White House in Washington, D.C., before Tan announced that he would be moving the company’s headquarters back to the United States from Singapore.
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when Broadcom Trying to acquire a competitor Qualcomm In 2018, its efforts suffered a $120 billion setback. Qualcomm rejected the proposal, and the Trump administration declared the deal a potential national security threat.
In March of the same year, Broadcom quit The acquisition would be the largest technology deal ever, and it said: “Qualcomm clearly represents a unique and sizable acquisition opportunity.”
As it turns out, Broadcom didn’t need it.
Broadcom shares soared 24% on Friday, marking its best day ever and pushing the company’s market value above $1 trillion for the first time. The chipmaker becomes the eighth member of the tech industry’s 13-figure club. Since abandoning Qualcomm’s acquisition bid, Broadcom’s stock price has risen more than 760%, far exceeding Qualcomm’s 165% rise in the same period. The S&P 500 rose 119%.
Broadcom and Qualcomm
When the acquisition was announced, Broadcom’s official headquarters was in Singapore, causing concern for the Trump administration. Broadcom applied to relocate in the United States, but Trump blocked the deal anyway.
Still, Broadcom CEO Hock Tan isn’t holding back from taking big steps. Far from it.
Broadcom has since closed three deals worth $10 billion or more, expanding its business beyond its core semiconductor market in the process. It agreed to acquire traditional software vendor CA Technologies for $19 billion in July 2018, and acquired security software company Symantec for $10.7 billion in August 2019.
Tan’s biggest bet occurred in 2022, when Broadcom said it would acquire VMware for $61 billion to enter the server virtualization market. The deal took 18 months to complete, trailing only Microsoft’s Dell’s $68.7 billion acquisition of Activision Blizzard and Dell’s $67 billion acquisition of EMC rank among the largest technology deals of all time.
Tan told CNBC’s Jim Cramer in a September interview that Broadcom “originally started as a semiconductor company, and over the last six years we’ve moved into infrastructure software and it’s been going really well.” “The recent acquisition of VMware is essentially another step toward creating a very balanced portfolio between enterprise-focused silicon and infrastructure software,” he said.
Broadcom reported better-than-expected profits in its latest quarterly earnings report on Thursday, although revenue was slightly below expectations. Broadcom’s artificial intelligence business has boosted overall growth rates to levels typically reserved for smaller companies.
exist fiscal fourth quarterartificial intelligence revenue grew 150% to $3.7 billion, with part of the growth coming from Ethernet components used to connect thousands of artificial intelligence chips together.
This drove overall revenue to grow 51% to $14.05 billion. Broadcom’s infrastructure software unit had revenue of $5.82 billion in the quarter, nearly double last year’s $1.97 billion, including a big boost from VMware.
Amid the AI craze, Broadcom fails to keep up NVIDIAwhose graphics processing unit is used to support the training and running of the most powerful artificial intelligence models. Nvidia’s market capitalization has soared more than 170% this year to $3.3 trillion, trailing only apple Microsoft ranks among the world’s most valuable public companies. Broadcom has doubled in value this year.
Although it lags behind Nvidia, Broadcom still positions itself for substantial growth in the era of the former chip giant. Intel Layoffs and reorganization are taking place. It also goes far beyond AMDAfter falling 14% this year, it’s valued at $206 billion.
Broadcom calls its custom AI accelerator XPU, which is different from the GPU sold by Nvidia. Broadcom said it doubled XPU shipments to “our three hyperscale customers.” The company did not name the customers, but analysts said the trio were Yuan, letter and TikTok parent company Byte Bounce.
“The future of artificial intelligence for both GPUs and XPUs looks very bright,” Cantor analysts wrote in a note following this week’s earnings. The firm recommended buying Broadcom stock and raised its 12-month target to $225 from $225. $250. The stock closed at $224.80 on Friday.
The history of big deals
Today’s Broadcom company is the product of: Merged in 2015 Avago was spun off from Agilent Technologies in 2005, and Broadcom was founded in Southern California in 1991. Tan was appointed CEO of Avago in 2006 and has been appointed to lead the company.
Broadcom’s fiscal year 2016 revenue was US$13.2 billion, and its largest business is set-top boxes and broadband access semiconductors.
In 2018, the company’s market capitalization exceeded US$100 billion, at a time when wired infrastructure was still the main source of revenue. Broadcom changed its financial reporting at the end of 2019 to focus on semiconductor solutions and infrastructure software, with the former accounting for approximately 73% of 2019 revenue. 2020.
But with the addition of VMware, infrastructure software’s share of revenue jumped from 21% in the October quarter to 41% in the quarter that just ended. Broadcom said that even excluding VMware, the business grew 90% compared with the same period last year.
The company said it expects infrastructure software revenue to rise 41% annually this quarter to $6.5 billion, while semiconductor revenue will grow 10% to $8.1 billion. The company said artificial intelligence revenue will increase 65% annually to $3.8 billion.
Tan told Cramer in September that Broadcom’s market opportunity continues to grow due to the computational demands of large language models created and deployed by large technology companies.
“Each new generation of LLM requires multiple times (2-3 times, or even more) of calculations every time,” Tan said. “You can imagine this is a driving force for greater and greater computing opportunities, and that will be dominated by XPUs.”
letter, AmazonMeta and Microsoft’s capital expenditures in the latest quarter totaled $58.9 billion, according to data from the technology research firm future. This represents a 63% growth, equivalent to about 18% of total revenue.
Piper Sandler analyst Harsh Kumar told CNBC’s “Squawk” that what sets Broadcom apart in the market is that it makes very expensive custom AI chips for the world’s top tech companies and promises to help them move faster. Increased by 20% to 30%, energy consumption reduced by 25%.
“You have to be Google, you have to be Meta, you have to be Microsoft or Oracle “These wafers are not for everyone,” Kumar said.
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