Broadcom might be enjoying a VMware-driven earnings boost, but the vendor is also set to prosper from growing demand around its artificial intelligence (AI)-focused custom chip designs and parallel AI-powered networking initiatives.

Broadcom’s overall AI-related revenues surged 220% year over year to $12.2 billion during its fourth fiscal quarter of 2024, which CEO Hock Tan tied to its custom AI accelerators and its networking business. These AI components accounted for 41% of Broadcom’s overall semiconductor revenue during that quarter and powered overall semiconductor revenue to a record $30.1 billion for the full fiscal year.

Tan stated that AI was set to become Broadcom’s dominant semiconductor driver over the next several years. This will be driven by Broadcom’s hyperscaler partners that are themselves driving significant investments into their AI-focused infrastructure and are relying heavily on Broadcom’s XPU architecture.

“We currently have three hyperscale customers who have developed their own multigenerational AI XPU roadmap to be deployed at varying rates over the next three years,” Tan said during Broadcom’s earnings call. “In 2027, we believe each of them plans to deploy one million XPU clusters across a single fabric.”

Tan added that this will feed into a total addressable market of up to $90 billion by 2027.

“The reality going forward for this company is that the AI semiconductor business will rapidly outgrow the non-AI semiconductor business,” Tan said.

Equity research firm William Blair noted in a research report that Broadcom currently supplies custom chips to Google, Meta, and Bytedance. It also noted that Broadcom hinted at a pair of new hyperscale customers it was working through a validation process with that the analyst firm suspects are OpenAI and Apple.

“Altogether, Broadcom’s commentary on its AI opportunity with customers was a positive reinforcement for our AI thesis, highlighting that despite some ongoing investor concerns about scaling laws and pre-/post-training compute needs, the largest hyperscalers remain steadfast in their plans to continue scaling out their AI clusters over the next few years,” William Blair noted in its report.

That robust forecast echoed data from other analyst firms that are predicting strong ongoing investments in support of AI plans.

Synergy Research Group (SRG) last year reported Amazon Web Services (AWS), Microsoft, and Google Cloud Platform (GCP) were in the midst of a data center expansion spree that will see them control nearly two-thirds of all data center capacity worldwide by the end of this decade, which is eight-times the capacity they controlled in 2017.

ABI Research noted in a report that this AI-fueled investment spree will also angle toward “large and mega-sized colocation facilities.” The firm noted that 28% of total worldwide data centers currently fit this size definition, but that “number will grow to 43% by 2030 as companies build larger data centers that can accommodate AI/generative AI workloads and other data-hungry applications.”

Broadcom’s AI networking drive This broader AI push is also powering Broadcom’s network chip opportunity.

The vendor’s AI networking revenues increased 158% year over year in Q4, and accounted for 76% of Broadcom’s total networking revenues. Tan said this growth was tied to its hyperscale customers and increased sales of its Tomahawk and Jericho platforms, which are set for further growth as new iterations come online.

Tan added that these new products, which will be built on a three-nanometer architecture, will ride the AI wave in doubling networking’s position in AI silicon.

All of this on top of VMware The timing of this AI-fueled growth opportunity tags onto the current VMware-driven surge.

Broadcom’s software infrastructure business, which is where VMware now lives, scored $5.8 billion in revenues during the most recent quarter. That was a 196% increase from what Broadcom generated from that division during the same quarter last year, which was also Broadcom’s last quarter of earnings before it closed on the VMware deal.

Broadcom CEO Hock Tan said the vendor booked 21 million total CPU cores during the latest quarter compared to 19 million cores posted in the previous quarter, highlighting Broadcom’s expanding VMware business. More significantly, Tan said that 70% of those new booked cores were on its flagship VMware Cloud Foundation (VCF) platform, “virtualizing the entire data center.”

Tan also noted that Broadcom had signed up 4,500 of its largest 10,000 customers to its VCF platform, and that the platform generated $2.7 billion in annualized booking value (ABV) during the latest quarter. Those numbers are significant improvements from the 3,000 resigned customers and $1.9 billion in ABV Tan noted during the vendor’s Q2 results.