Broadcom and OpenAI Launch New Chip Jalapeno to Boost AI Performance
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Source: CNBC
- Chip Launch: Broadcom and OpenAI have unveiled the Jalapeno chip, designed to lower AI computation token costs by enhancing performance per watt, thereby strengthening the company's competitive position in the AI accelerator market.
- Market Reaction: Broadcom shares have dropped nearly 20% since early June, and the launch of Jalapeno may provide a floor for the stock, although the market remains cautious about the company's future earnings potential.
- Custom Chip Strategy: CEO Hock Tan stated that developing custom silicon will help developers reduce costs and improve efficiency, although custom chips lack the flexibility of Nvidia's GPU solutions.
- Future Outlook: Jalapeno is expected to see initial deployment later in 2023, with plans for scaling up production by 2027, demonstrating Broadcom's strong confidence in future market demand.
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Analyst Views on AVGO
Wall Street analysts forecast AVGO stock price to rise
30 Analyst Rating
29 Buy
1 Hold
0 Sell
Strong Buy
Current: 380.150
Low
370.00
Averages
457.75
High
525.00
Current: 380.150
Low
370.00
Averages
457.75
High
525.00
About AVGO
Broadcom Inc. is a global technology firm that designs, develops, and supplies a range of semiconductors, enterprise software and security solutions. The Company operates through two segments: semiconductor solutions and infrastructure software. Its semiconductor solutions segment includes all of its product lines and intellectual property (IP) licensing. It provides a variety of radio frequency semiconductor devices, wireless connectivity solutions, custom touch controllers, and inductive charging solutions for mobile applications. Its infrastructure software segment includes its private and hybrid cloud, application development and delivery, software-defined edge, application networking and security, mainframe, distributed and cybersecurity solutions, and its FC SAN business. It provides a portfolio of software solutions that enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Broadcom Stock Plummets Due to Downgraded Guidance
- Significant Revenue Growth: Broadcom's Q2 sales surged 48% year-over-year to a record $22.2 billion, with AI chip revenue skyrocketing 143% to $10.8 billion, indicating strong demand for AI accelerators and computing, yet the market reacted negatively.
- Stock Price Volatility: Following the Q2 earnings release, Broadcom's stock plummeted 21% from $481 on June 2 to $380 by June 23, primarily due to profit-taking by investors amid high valuations and increasing concerns over future margin compression.
- Guidance Downgrade: Broadcom anticipates a decline in gross margin to 74% in Q3, down from 77% in Q2, largely due to a higher proportion of lower-margin but rapidly growing AI chips, raising widespread market concerns despite significant revenue increases.
- Increased Valuation Appeal: Despite short-term pressures, Broadcom's five-year price-to-earnings-to-growth ratio stands at 0.68, indicating its potential as a value stock, while its forward P/E has dropped to a more attractive 32 from 37 a few months ago, potentially offering a buying opportunity for investors.
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Broadcom Expands AI Infrastructure, Strong Growth Ahead
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- Investor Focus: Although the market has already priced in expectations for future growth, Broadcom's AI business is still considered one of the most compelling stock stories to watch, reflecting investor confidence in its long-term value.
- Stock Performance: As of June 13, 2026, Broadcom's stock price has risen, showcasing the market's positive response to its investments in AI infrastructure, further solidifying its leadership position in the tech sector.
- Strategic Importance: Broadcom's next phase will focus on meeting the compute capacity needs of AI labs, which will not only enhance its competitive edge in the market but also potentially yield substantial long-term returns for the company.
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- Market Expansion Strategy: Qualcomm is set to announce its strategy for expanding into the rapidly growing AI data center chip market during its investor day on Wednesday, aiming to break free from the limitations of its core smartphone business amid a highly competitive landscape.
- Customer Acquisition Expectations: Analysts anticipate Qualcomm will reveal new customers for its AI chips, attempting to carve out a niche in a market dominated by Nvidia, reflecting increasing pressures in the smartphone sector.
- Financial Target Outlook: By fiscal 2027-2028, Qualcomm's data center business is expected to generate annual revenues of $2 billion to $5 billion, with investors keenly watching for updates on long-term financial targets, particularly regarding growth in non-handset sectors.
- Acquisition Strategy: Qualcomm announced a $4 billion all-stock acquisition of AI software startup Modular, aiming to compete against Nvidia's proprietary CUDA software, thereby strengthening its market position in the AI sector.
See More
Broadcom and OpenAI Unveil Jalapeno Chip for AI Infrastructure
- Chip Launch Collaboration: Broadcom and OpenAI have unveiled the Jalapeno chip, marking OpenAI's first custom AI chip designed to support future AI inference workloads, thereby enhancing the speed and reliability of AI applications.
- Infrastructure Development Plan: Broadcom plans to deploy the platform in gigawatt-scale AI data centers with partners like Microsoft starting in 2026, demonstrating the company's long-term commitment to building the necessary infrastructure for future AI advancements.
- Performance Improvement Expectations: Early tests indicate that the Jalapeno chip delivers better performance per watt than current state-of-the-art AI accelerators, which is expected to significantly enhance the efficiency of computing resource utilization.
- Positive Market Reaction: Following the Jalapeno announcement, shares of Broadcom and Celestica rose approximately 1.6% and 5%, respectively, reflecting the market's optimistic outlook on this collaboration.
See More
SpaceX IPO Sparks Investor Excitement with Future AI Revenue Potential
- SpaceX Future Outlook: Following its IPO, SpaceX has captured investor interest with a projected revenue of $1 trillion by 2030, although this ambitious target faces significant technical challenges and market competition.
- StarLink Profitability: Currently, StarLink serves as SpaceX's largest source of profit, while the company's reusable rocket launch business provides a cost advantage in launching satellites and other payloads, enhancing its competitive position in the market.
- AI Technology Integration: Elon Musk's merger of his xAI business with SpaceX aims to leverage space-based data centers to address AI's power consumption issues, despite needing to overcome technical hurdles such as cooling systems and radiation-resistant chips.
- Growth Potential for Broadcom and AMD: Broadcom anticipates generating over $100 billion in ASIC revenue by 2027, while AMD shows strong growth potential in the inference market and agentic AI, indicating a rapidly rising demand for AI-related technologies.
See More
Broadcom and OpenAI Launch New Chip Jalapeno to Boost AI Performance
- Chip Launch: Broadcom and OpenAI have unveiled the Jalapeno chip, designed to lower AI computation token costs by enhancing performance per watt, thereby strengthening the company's competitive position in the AI accelerator market.
- Market Reaction: Broadcom shares have dropped nearly 20% since early June, and the launch of Jalapeno may provide a floor for the stock, although the market remains cautious about the company's future earnings potential.
- Custom Chip Strategy: CEO Hock Tan stated that developing custom silicon will help developers reduce costs and improve efficiency, although custom chips lack the flexibility of Nvidia's GPU solutions.
- Future Outlook: Jalapeno is expected to see initial deployment later in 2023, with plans for scaling up production by 2027, demonstrating Broadcom's strong confidence in future market demand.
See More
Broadcom Stock Plummets Due to Downgraded Guidance
- Significant Revenue Growth: Broadcom's Q2 sales surged 48% year-over-year to a record $22.2 billion, with AI chip revenue skyrocketing 143% to $10.8 billion, indicating strong demand for AI accelerators and computing, yet the market reacted negatively.
- Stock Price Volatility: Following the Q2 earnings release, Broadcom's stock plummeted 21% from $481 on June 2 to $380 by June 23, primarily due to profit-taking by investors amid high valuations and increasing concerns over future margin compression.
- Guidance Downgrade: Broadcom anticipates a decline in gross margin to 74% in Q3, down from 77% in Q2, largely due to a higher proportion of lower-margin but rapidly growing AI chips, raising widespread market concerns despite significant revenue increases.
- Increased Valuation Appeal: Despite short-term pressures, Broadcom's five-year price-to-earnings-to-growth ratio stands at 0.68, indicating its potential as a value stock, while its forward P/E has dropped to a more attractive 32 from 37 a few months ago, potentially offering a buying opportunity for investors.
See More
Broadcom Expands AI Infrastructure, Strong Growth Ahead
- Market Demand Outlook: Broadcom is deepening its involvement in AI infrastructure, with significant growth in compute capacity demand expected by 2028, indicating strong market potential that could drive future revenue growth for the company.
- Investor Focus: Although the market has already priced in expectations for future growth, Broadcom's AI business is still considered one of the most compelling stock stories to watch, reflecting investor confidence in its long-term value.
- Stock Performance: As of June 13, 2026, Broadcom's stock price has risen, showcasing the market's positive response to its investments in AI infrastructure, further solidifying its leadership position in the tech sector.
- Strategic Importance: Broadcom's next phase will focus on meeting the compute capacity needs of AI labs, which will not only enhance its competitive edge in the market but also potentially yield substantial long-term returns for the company.
See More
Qualcomm Investor Day to Focus on AI Chip Market Expansion
- Market Expansion Strategy: Qualcomm is set to announce its strategy for expanding into the rapidly growing AI data center chip market during its investor day on Wednesday, aiming to break free from the limitations of its core smartphone business amid a highly competitive landscape.
- Customer Acquisition Expectations: Analysts anticipate Qualcomm will reveal new customers for its AI chips, attempting to carve out a niche in a market dominated by Nvidia, reflecting increasing pressures in the smartphone sector.
- Financial Target Outlook: By fiscal 2027-2028, Qualcomm's data center business is expected to generate annual revenues of $2 billion to $5 billion, with investors keenly watching for updates on long-term financial targets, particularly regarding growth in non-handset sectors.
- Acquisition Strategy: Qualcomm announced a $4 billion all-stock acquisition of AI software startup Modular, aiming to compete against Nvidia's proprietary CUDA software, thereby strengthening its market position in the AI sector.
See More
Broadcom and OpenAI Unveil Jalapeno Chip for AI Infrastructure
- Chip Launch Collaboration: Broadcom and OpenAI have unveiled the Jalapeno chip, marking OpenAI's first custom AI chip designed to support future AI inference workloads, thereby enhancing the speed and reliability of AI applications.
- Infrastructure Development Plan: Broadcom plans to deploy the platform in gigawatt-scale AI data centers with partners like Microsoft starting in 2026, demonstrating the company's long-term commitment to building the necessary infrastructure for future AI advancements.
- Performance Improvement Expectations: Early tests indicate that the Jalapeno chip delivers better performance per watt than current state-of-the-art AI accelerators, which is expected to significantly enhance the efficiency of computing resource utilization.
- Positive Market Reaction: Following the Jalapeno announcement, shares of Broadcom and Celestica rose approximately 1.6% and 5%, respectively, reflecting the market's optimistic outlook on this collaboration.
See More
SpaceX IPO Sparks Investor Excitement with Future AI Revenue Potential
- SpaceX Future Outlook: Following its IPO, SpaceX has captured investor interest with a projected revenue of $1 trillion by 2030, although this ambitious target faces significant technical challenges and market competition.
- StarLink Profitability: Currently, StarLink serves as SpaceX's largest source of profit, while the company's reusable rocket launch business provides a cost advantage in launching satellites and other payloads, enhancing its competitive position in the market.
- AI Technology Integration: Elon Musk's merger of his xAI business with SpaceX aims to leverage space-based data centers to address AI's power consumption issues, despite needing to overcome technical hurdles such as cooling systems and radiation-resistant chips.
- Growth Potential for Broadcom and AMD: Broadcom anticipates generating over $100 billion in ASIC revenue by 2027, while AMD shows strong growth potential in the inference market and agentic AI, indicating a rapidly rising demand for AI-related technologies.
See More
Broadcom and OpenAI Launch New Chip Jalapeno to Boost AI Performance
- Chip Launch: Broadcom and OpenAI have unveiled the Jalapeno chip, designed to lower AI computation token costs by enhancing performance per watt, thereby strengthening the company's competitive position in the AI accelerator market.
- Market Reaction: Broadcom shares have dropped nearly 20% since early June, and the launch of Jalapeno may provide a floor for the stock, although the market remains cautious about the company's future earnings potential.
- Custom Chip Strategy: CEO Hock Tan stated that developing custom silicon will help developers reduce costs and improve efficiency, although custom chips lack the flexibility of Nvidia's GPU solutions.
- Future Outlook: Jalapeno is expected to see initial deployment later in 2023, with plans for scaling up production by 2027, demonstrating Broadcom's strong confidence in future market demand.
See More
