Broadcom stock was getting a much-needed boost early Thursday. The company looks set to benefit from greater use of its chip designs by Meta Platforms.
Meta CEO Mark Zuckerberg pledged "hundreds of billions of dollars" of long-term investment in artificial-intelligence technology alongside the social-media company's earnings report after the close of trading on Wednesday.
An important component of Meta's AI infrastructure is the MTIA chip, an acronym for Meta Training and Inference Accelerator. The first MTIA chip made its debut in 2023, and was developed jointly with Broadcom.
"We're pursuing cost efficiencies by deploying our custom MTIA silicon in areas where we can achieve a lower cost of compute by optimizing the chip to our unique workloads," Meta Chief Financial Officer Susan Li told analysts on an earnings call.
Broadcom shares were up 4.5% at $215.66 Thursday. Broadcom's gains would go some way toward paring its 14% loss over the previous five trading sessions amid the panic caused by Chinese firm DeepSeek's low-cost AI models.
Notably, Li also said that MTIA chips could replace graphics-processing units -- the specialty of AI processor leader Nvidia -- in some servers and be expanded to power AI training. So far, custom chips have generally been used mainly for inference, the process of generating answers or results from the models, rather than training.
Broadcom isn't the only company helping big tech players make custom chips. According to reports, Marvell Technology is teaming up with Microsoft to help build the Azure Maia AI Accelerator.
Barron's has reached out to Microsoft and Marvell for comment.
On Microsoft's earnings call Wednesday, CEO Satya Nadella said that the company not only uses third-party chips, but is working on their own.
"We continue to take advantage of Moore's Law and refresh our fleet as evidenced by our support of the latest from AMD, Intel, Nvidia as well as our first-party silicon innovation from Maia, Cobalt, Boost and HSM," Nadella said. Shares of Marvell were rising 3.3% on Thursday.
As Barron's has previously written, custom AI chips are nothing new. Morgan Stanley's technology team estimates the custom AI chip share of the market stood at 11% in 2024, and will rise to 15% in 2030 with the balance going to AI GPUs, primarily made by Nvidia. However, DeepSeek's advances could incentivize efforts to lower costs by making greater use of in-house chips.
There could also be some further good news for Broadcom, in the shape of a potential $15 billion to $25 billion investment in ChatGPT-developer OpenAI from Japan's SoftBank Group, as reported by The Wall Street Journal.
In December, Broadcom said that it had won deals to develop next-generation AI chips for two new, undisclosed customers, and OpenAI is widely assumed by analysts to be one.
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