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Broadcom (NASDAQ:AVGO) stock is in the spotlight after The Information reported that the firm was in talks with OpenAI about producing a new chip.
These talks still appear to be in the early stages, as OpenAI has engaged in discussions with other chip designers as well. The artificial intelligence (AI) company has also been hiring employees involved with the production of Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Tensor processing unit in an attempt to create its own AI server chip, according to sources familiar with the matter. Former Google employee Richard Ho is leading these efforts.
“OpenAI is having ongoing conversations with industry and government stakeholders about increasing access to the infrastructure needed to ensure AI’s benefits are widely accessible,” said an OpenAI spokesperson.
The company is pursuing the prospect of creating its own chips in order to cut down on the costs needed for its AI models, such as ChatGPT and DALL-E3.
AVGO Stock: Broadcom Is in Chip Talks With OpenAI
This news comes as AVGO stock has soared higher by about 50% year-to-date (YTD) on the heels of an AI boom. Shares of the company also began trading on a 10-f0r-1 stock split-adjusted basis beginning on July 15.
If OpenAI and Broadcom end up collaborating, the earliest that production of the chip could begin is 2026, according to Wells Fargo. The investment bank characterized the potential collaboration as “further validating Broadcom’s position as the leading partner for internal AI-optimized silicon development.”
Wells Fargo also believes that custom AI XPUs will account for around 70% of Broadcom’s AI semiconductor revenue in fiscal year 2024, which is expected to be at least $11 billion.
“The bank notes that Broadcom’s slides from their March Enabling AI Infrastructure event illustrate plans for up to seven new custom XPUs shipping between 2025 and 2026,” wrote StreetInsider. “This diversification and expansion into custom AI silicon solidify Broadcom’s leading position in the market.”
Across the board, Wall Street analysts have an average AVGO stock price target of $177.80 per share, implying further upside from current prices. The highest price target is at $219.37 while the lowest sits at $137.11.
On the date of publication, Eddie Pan held a LONG position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.
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