Broadcom Inc to collaborate on developing an AI processor with OpenAI

Broadcom Inc, a leading semiconductor manufacturer, has announced a significant collaboration with OpenAI, the renowned artificial intelligence (AI) research organisation. The partnership aims to design and produce custom AI accelerators, with deliveries set to begin in 2026.

The collaboration comes as Broadcom secures more than US$10 billion in orders from OpenAI, making it one of the company's major clients for its AI accelerator target group. This news has sent waves through the industry, as Broadcom enters a market currently dominated by Nvidia Corp.

The announcement was made by Broadcom's CEO, Hock Tan, during the company's recent earnings call. Tan revealed that one of the prospects had released production orders to Broadcom, although he did not name the customer. However, it has since been confirmed that OpenAI is the client in question.

The new customer is expected to accelerate the growth rate of AI revenue for Broadcom. Analysts project a growth of 50 percent to 60 percent for AI revenue next year, a significant increase from the previously indicated outlook. The financial impact of this collaboration is already being felt, with Broadcom's market value adding about US$730 billion, making it the third-best performer in the NASDAQ 100 Index.

Broadcom's shares have also seen a substantial rise, more than doubling since hitting a low in April. The company's quarterly results initially drew a tepid reaction from investors, but the stock gained more than 3 percent during the conference call, reflecting the excitement surrounding the OpenAI collaboration.

The Financial Times reported earlier that OpenAI would use the chip, adding credibility to the partnership. The first chips from this lineup are planned to be shipped starting next year. With OpenAI's initial use of the chip for internal purposes, it is expected that the growth rate of AI revenue will be "fairly material."

In light of this development, Broadcom now expects the outlook for fiscal 2026 AI revenue to improve significantly from what was indicated last quarter. The company's sales for the fiscal fourth quarter are expected to be about US$17.4 billion.

Tan expressed optimism about the future, expecting Broadcom's outlook to improve "significantly" next year, with the new customer bringing "immediate and pretty substantial demand." The collaboration between Broadcom and OpenAI marks a significant step forward in the development and application of AI technology.