OpenAI and Broadcom Launch First AI Accelerator Chip
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 hours ago
0mins
Source: Newsfilter
- First AI Accelerator Launch: OpenAI and Broadcom have unveiled the Jalapeño chip, described as an Intelligence Processor, marking OpenAI's entry into AI silicon and aiming to enhance the speed, reliability, and accessibility of advanced AI.
- Chip Production and Application: The Jalapeño chip will be manufactured by Broadcom and utilized by OpenAI for inference processes, supporting computational demands for applications like ChatGPT, thereby aiding OpenAI in building a comprehensive technology stack for its products.
- Market Demand and Strategic Shift: In response to surging demand for AI models, OpenAI is diversifying its silicon sources beyond Nvidia's GPUs by forging partnerships with companies like Amazon AWS, ensuring it meets future computational needs effectively.
- Future Deployment Plans: The initial deployment of Jalapeño chips is targeted for the end of 2026, with an anticipated power requirement of 10 gigawatts, indicating OpenAI's long-term strategic positioning in the AI hardware landscape.
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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.
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- 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
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- 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
Broadcom and OpenAI Unveil Jalapeño Chip for AI Inference
- Chip Launch: Broadcom and OpenAI have unveiled the Jalapeño chip, specifically designed for large language model inference, marking a significant step in their collaboration in AI hardware, which is expected to enhance AI application performance.
- Rapid Development Cycle: OpenAI reported that the Jalapeño chip was developed from design to production in just nine months, showcasing the efficiency of its AI models in hardware development, which could accelerate future AI infrastructure deployment.
- Long-term Partnership Plan: The collaboration aims to co-develop 10GW of custom AI accelerators, with plans to deploy AI accelerator and networking systems starting in 2026 and completing by 2029, demonstrating a strong commitment to the future AI market.
- Market Impact: The launch of the Jalapeño chip not only enhances Broadcom's market position but may also attract more investor attention to its long-term strategy in AI, potentially driving the company's stock price upward.
See More
OpenAI Partners with Broadcom to Develop AI Chip
- New Chip Development: OpenAI has partnered with Broadcom to develop a new AI chip called the LLM optimized inference chip, aimed at enhancing AI computing performance, which is expected to positively impact the market.
- Performance Expectations: Early testing indicates that the chip's performance per watt will surpass current state-of-the-art technologies, suggesting that this collaboration could lead to significant advancements in the AI sector and strengthen both companies' competitive positions.
- Rapid Development Cycle: The design-to-production timeline for the chip is only nine months, demonstrating the efficient collaboration between the two companies, which may lay the groundwork for future product launches.
- Broadcom Stock Recovery: Following the announcement, Broadcom's shares rose approximately 2%, indicating a positive market reaction to the partnership, which could help alleviate the stock pressure faced by Broadcom after its earnings report.
See More
Broadcom Deepens Investment in AI Infrastructure
- AI Infrastructure Expansion: Broadcom is intensifying its investment in AI infrastructure to meet the compute capacity needs of AI labs, with demand visibility extending into 2028, indicating strong growth potential.
- Investor Attention Rising: While market expectations for future growth are already reflected in stock prices, Broadcom's next phase remains one of the most important AI stock stories to watch, showcasing investor confidence in its future performance.
- Market Competition Analysis: Despite the promising outlook for Broadcom in the AI sector, the analyst team has identified 10 stocks deemed better investment choices, with Broadcom not making the cut, reflecting a cautious market sentiment regarding its potential returns.
- Historical Return Comparison: Historical investment returns highlight that companies like Netflix and Nvidia delivered exceptional returns of 392,713% and 1,227,782% respectively when recommended, indicating that Broadcom must demonstrate similar growth potential to attract investors in the future.
See More
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- Chip Launch: OpenAI and Broadcom have unveiled their first custom chip, named Jalapeño, marking OpenAI's entry into AI silicon, which is expected to significantly enhance the inference efficiency of its AI models.
- Market Reaction: Following the announcement, Broadcom's shares rose approximately 2%, reflecting positive market sentiment regarding its sustained demand and growth potential in the generative AI sector.
- Technological Innovation: The Jalapeño chip, referred to as an 'Intelligence Processor', aims to accelerate AI task processing, with initial deployment targeted by the end of 2026, and plans for broader applications in the future.
- Strategic Partnership: The collaboration between OpenAI and Broadcom not only addresses the increasing computational demands but also enhances OpenAI's self-reliance in AI development, reducing dependency on other suppliers.
See More
