Broadcom Becomes Latest Chipmaker to See Its Stock Jump on a Deal with OpenAI. Is It Too Late to Buy the Stock?

Core Viewpoint - Broadcom has announced a partnership with OpenAI to develop and deploy custom AI accelerators, marking a significant step in the AI chip market, although OpenAI is not the $10 billion customer previously speculated by Broadcom [1][7]. Group 1: Partnership Details - Broadcom and OpenAI will collaborate to create 10 gigawatts of custom AI accelerators, utilizing Broadcom's networking and Ethernet technology [2][3]. - OpenAI's aggressive expansion includes commitments to over 30 gigawatts of power capacity from various partners, significantly increasing its computing power [4]. Group 2: Market Position and Opportunities - The partnership positions Broadcom as a key player in the custom AI chip market, with potential revenue opportunities from major tech companies like Alphabet, Meta Platforms, and ByteDance, estimated between $60 billion to $90 billion by fiscal 2027 [6]. - Broadcom's custom chips could help OpenAI reduce costs and enhance performance, aligning with the anticipated shift in the AI market towards inference [5]. Group 3: Financial Outlook - Broadcom's stock is currently trading at a high forward price-to-earnings (P/E) ratio of over 38.5, but has a price/earnings-to-growth (PEG) ratio below 0.8, indicating potential undervaluation [9]. - The OpenAI deal could generate significant revenue, potentially exceeding $100 billion annually as new custom chips are deployed [9].