Broadcom’s CEO, Hock Tan, has predicted that the global chip demand will remain strong, driven by the rise of AI technology.
During an interview with Jim Cramer on CNBC’s Mad Money, Tan discussed how AI clusters, used to handle the growing computational needs of artificial intelligence, will see explosive growth over the next three to five years.
This marks a significant opportunity for companies like Broadcom, which are well-positioned to meet this demand.
AI Accelerators to Grow Exponentially
According to Tan, the size of AI clusters is expected to double with each new generation, as tech companies continue to compete in creating faster and more efficient AI systems.
Currently, large-scale AI clusters use approximately 100,000 accelerators, but Tan believes that future builds will include as many as one million accelerators.
These accelerators are essential for processing massive amounts of data, especially as large language models (LLMs) and other AI-driven applications become more complex and widespread.
The CEO stressed that advancements in AI models will require increasingly powerful hardware, leading to a steady increase in demand for custom-built AI silicon and advanced semiconductors.
Broadcom, which designs specialized chips for various sectors, sees this as a long-term growth opportunity.
Broadcom’s Strategic Role in AI Development
Broadcom aims to play a significant role in the future of AI computing by developing custom-built XPUs, a new generation of processors designed to handle specific AI tasks.
Unlike traditional GPUs, XPUs are tailored for particular workloads, making them more efficient for tasks like deep learning and natural language processing.
Tan expects XPUs to outpace GPUs in the near future, as companies shift towards specialized hardware to meet the ever-growing needs of AI.
Broadcom’s forward-thinking approach echoes the success of Nvidia, a key player in the AI chip market. Nvidia, which invested heavily in AI chips early on, briefly held the title of the world’s most valuable company.
While it now ranks third with a market cap of $2.78 trillion, the company’s AI chip dominance highlights the importance of being an early mover in this fast-evolving industry.
Broadcom’s AI Revenue and Future Outlook
As a testament to the surging demand for AI technology, Broadcom has raised its AI revenue expectations to $12 billion for fiscal year 2024.
This projection reflects the company’s confidence in the ongoing growth of the AI sector and its ability to meet the demand for cutting-edge components.
Tan also touched on the broader semiconductor market, which has been impacted by the pandemic-induced chip shortage.
While the recovery for non-AI semiconductor production is expected to take time, with a potential turnaround in 2025 or 2026, the CEO remains optimistic about the future.
In addition to AI chips, Broadcom sees continued strong demand for its Wi-Fi and storage connectivity products, further boosting its market position.
The Future of AI Clusters and Chip Demand
With AI technology advancing at a rapid pace, companies will need to build larger, more powerful AI clusters to keep up. The demand for accelerators, custom-built processors, and other advanced semiconductor components will continue to rise.
Broadcom’s focus on developing specialized hardware solutions puts it in a prime position to benefit from this ongoing trend.
