Broadcom (AVGO) Stock Rises as New Thor Ultra Chip Takes Aim at Nvidia

TLDR

• Broadcom launched the Thor Ultra networking chip on Tuesday to compete with Nvidia in AI computing infrastructure
• The chip enables data centers to connect hundreds of thousands of processors for large AI model operations
• Broadcom announced a deal Monday to supply $10 billion worth of custom chips to OpenAI starting in late 2026
• The company reported $12.2 billion in AI revenue for fiscal 2024 and targets a $60-90 billion market by 2027
• Bernstein maintained an Outperform rating on Broadcom stock with a $400 price target based on AI growth potential

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Broadcom released its Thor Ultra networking chip Tuesday. The new processor aims to help data centers build larger AI computing systems.

The chip lets operators connect far more processors than previous versions allowed. This capability is crucial for running the large language models that power applications like ChatGPT.

Thor Ultra directly competes with Nvidia’s networking interface chips. The release comes as Broadcom pushes to expand its presence in AI data center infrastructure.

Broadcom Inc. (AVGO)

The timing follows Monday’s announcement of a major OpenAI partnership. Broadcom will supply 10 gigawatts of custom chips to the ChatGPT maker starting in the second half of 2026.

CEO Hock Tan outlined the company’s AI ambitions late last year. He said Broadcom is targeting a $60 billion to $90 billion market by 2027.

That market includes both networking chips and custom data center processors. The company builds these chips for clients including Alphabet’s Google and OpenAI.

Building Bigger AI Clusters

Broadcom reported $12.2 billion in AI revenue for fiscal 2024. In September, the company added another unnamed $10 billion customer for its custom AI chips.

The Thor Ultra serves as a critical connection point in AI systems. It links computing clusters to the broader data center infrastructure.

Engineers doubled the bandwidth on Thor Ultra compared to the previous version. The chip underwent extensive testing from early production stages.

The development process involves multiple teams. Engineers work with hardware specialists to determine packaging, power requirements, and heat output.

Design Focus Over Hardware Sales

Broadcom doesn’t sell complete servers. Instead, it provides reference designs to customers.

These designs help clients build networking infrastructure around Broadcom’s chips. The approach leverages partner investments in the ecosystem.

Bernstein analyst Stacy Rasgon reiterated an Outperform rating on the stock Tuesday. The firm set a $400 price target.

Rasgon expects positive earnings revisions driven by AI revenue growth. He noted that current revenue estimates appear too conservative.

The analyst addressed investor concerns about profit margins. While AI expansion might pressure margins somewhat, Rasgon doesn’t expect them to “plummet.”

Broadcom maintains gross profit margins of 77.19 percent. The company has a market capitalization of $1.68 trillion and posted 28 percent year-over-year revenue growth.

The stock closed at $356.70 on October 13, up 9.88 percent. Pre-market trading showed the price at $347.30 on October 14.

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