Broadcom's AI Revenue Outlook Fails to Impress Market Despite Record Backlog
Singapore-listed chipmaker Broadcom suffered a post-earnings selloff as its artificial intelligence revenue projections underwhelmed investors seeking exponential growth in the red-hot AI semiconductor space.
Shares declined approximately 4% in after-hours trading on December 11, erasing earlier gains following cautious commentary from CEO Tan Hock Eng during the company's quarterly earnings call.
Massive Backlog Signals Strong Demand Pipeline
The Singapore-born executive revealed Broadcom maintains a substantial US$73 billion backlog of AI product orders scheduled for delivery over the next six quarters. While impressive in absolute terms, this figure fell short of the aggressive growth expectations that have propelled AI semiconductor valuations to stratospheric levels.
"We do expect much more as additional orders materialize for shipments within that timeframe," Tan clarified, emphasizing the figure represents a "minimum" commitment. "Lead times vary significantly depending on product specifications, ranging from six months to a full year."
Strategic Partnerships Drive Revenue Growth
Broadcom secured an US$11 billion order from AI startup Anthropic in Q4, following a US$10 billion deal in the previous quarter. The company also inked another US$1 billion customer contract, though Tan declined to identify the client.
These partnerships underscore Broadcom's strategic positioning in the AI value chain, particularly through its custom chip designs for major cloud providers. The company's collaboration with OpenAI for ChatGPT infrastructure and its involvement in Google Cloud's tensor processing units (TPUs) through Alphabet demonstrate its embedded role in AI model deployment.
Margin Pressures Emerge Amid Volume Growth
Despite robust demand, Tan cautioned that total profit margins are compressing due to the competitive dynamics in AI product sales. This development highlights a familiar pattern in Southeast Asian technology markets where rapid scaling often pressures profitability metrics.
AI semiconductor revenue is projected to double to US$8.2 billion in Q1 compared to the previous year, reflecting strong underlying demand fundamentals.
Navigating Nvidia's Shadow in AI Computing
Broadcom continues operating in the considerable shadow of Nvidia, the dominant force in AI processors. However, the company's focus on custom silicon solutions and data center networking infrastructure positions it as a complementary player rather than direct competitor.
The company's networking equipment upgrades, designed to accelerate data movement within and between data centers, address critical infrastructure bottlenecks as AI models grow increasingly complex and computationally demanding.
Conservative Guidance Reflects Market Uncertainty
Management's decision to withhold 2026 AI revenue guidance signals prudent capital allocation in an evolving market landscape. "It's a moving target," Tan acknowledged. "Rather than provide potentially misleading projections, we prefer maintaining operational flexibility."
This measured approach, reminiscent of Singapore's technocratic governance style, contrasts sharply with the exuberant forecasting common among AI-focused companies.
Broadcom reported Q1 fiscal sales guidance of approximately US$19.1 billion, exceeding analyst estimates of US$18.5 billion. The company also increased its quarterly dividend by 10% to 65 US cents per share, demonstrating confidence in underlying business fundamentals despite AI market volatility.