The Hidden Architect of the AI Boom: Why Broadcom Earns Billions Even Without Its Own GPUs
Record revenue, record operating profit, and orders for AI chips that in a single quarter were nearly three times what the company could ship. The stock responded the next day with a 12.6 percent drop, and last week one of the largest U.S. banks downgraded Broadcom. It wasn't about results, but about one sentence in the filing to the securities regulator.
Key points
AI semiconductors brought in $10.8 billion last quarter and grew 143 percent.
Orders for AI chips exceeded $30 billion, deliveries about a third of that. The annual outlook remained unchanged.
Broadcom guarantees lease payments for third-party data centers with a maximum exposure of $29 billion.
Bank of America calculated that at full ramp-up this means financing of $370 billion.
The stock trades at about 25 times earnings expected for next year. Surprisingly low for a company with such growth.
On June 3 of this year, Broadcom $AVGO announced the best quarter in its history. Revenue of $22.19 billion, up 48 percent year over year. Adjusted earnings per share of $2.44 versus the average analyst estimate of around $2.40. Free cash flow of $10.26 billion, or 46 percent of total revenue. And on the conference call, Hock Tan added the strongest number of all: orders for AI semiconductors during the quarter exceeded $30 billion, while the company managed to ship $10.8 billion.
The next day the stock closed at $418.91, down 12.59 percent.
Since then the path continued in the same direction. On August 11, Bank of America downgraded Broadcom's credit rating due to its new financial platform. Three days later it published a calculation with one specific number, and the stock responded on Friday, August 14, with another drop of nearly six percent to $392.99. From the 52-week high of $495, the stock is down about a fifth, and year-to-date it holds a gain of under 14 percent, which in a year when the company is nearly tripling AI revenue is a provocatively lukewarm result.
Yet the business itself is not questioned by anyone. Morgan Stanley $MS wrote about Broadcom in July that it remains "a close second behind Nvidia" $NVDA. Its customers include Google $GOOGL, Meta $META, OpenAI, and Anthropic. For fiscal year 2027 it is expected to earn over $100 billion from AI semiconductors, more than the entire Broadcom earned last year.
So the dispute is not about whether demand exists. It lies elsewhere: who will ultimately pay for those chips, and with whose money?