By Arsheeya Bajwa and Zaheer Kachwala (Reuters) - On Thursday, Broadcom (AVGO) predicted higher quarterly revenue than Wall Street estimates, expecting strong demand for its custom AI chips in upcoming years. Shares of the company, based in Palo Alto, California, rose by 13% in premarket trading on Friday. CEO Hock Tan mentioned in a conference call with investors that he anticipates a revenue opportunity from AI between $60 billion and $90 billion in fiscal 2027, with three "hyperscale" clients likely deploying millions of AI chip clusters. Major tech firms are seeking to reduce reliance on costly, limited-supply AI processors from leading manufacturer Nvidia, which benefits Broadcom as it provides advanced custom AI chips for hyperscalers. Broadcom has also seen increased demand for its networking chips, which facilitate large data transfers needed for applications like OpenAI's ChatGPT, as businesses invest further in GenAI infrastructure. "Broadcom's strong performance isn't surprising.

It benefits from AI rejuvenating the global semiconductor industry, with AI revenue up 220% this year, " said eMarketer analyst Jacob Bourne. The company projects first-quarter revenue around $14. 6 billion, slightly above the analyst average estimate of $14. 57 billion from LSEG data. However, some analysts question future business from Apple (AAPL), a key wireless client, as Apple plans to design more chips in-house, including switching to a homemade Bluetooth and Wi-Fi chip next year, replacing parts currently supplied by Broadcom, as reported by Bloomberg News on Thursday. Despite tough competition from Nvidia's (NVDA) ethernet-like Infiniband products, Broadcom remains strong in the AI data center expansion, being a major provider of advanced networking equipment. "Broadcom will remain significant in the custom AI ASIC market, alongside companies like Marvell, as leading hyperscalers continue to introduce in-house chips, " said Kinngai Chan, senior analyst at Summit Insights. Application-Specific Integrated Circuits, or ASICs, are designed for specific tasks or applications. Broadcom, primarily known as a chipmaker, has expanded into a tech conglomerate through acquisitions like its $69 billion purchase of cloud computing firm VMware. The infrastructure software segment saw a 196% increase year-over-year to $5. 82 billion in the fourth quarter.