Broadcom stock (AVGO) surged over 24% on Friday following the company's optimistic forecast for the artificial intelligence market outlined during its quarterly earnings call the night before. CEO Hock Tan highlighted that Broadcom anticipates its custom AI chips will bring in $60 billion to $90 billion in revenue over the next three years from three existing hyperscaler clients, whose names were not disclosed. Tan maintains that these hyperscalers will each implement 1 million clusters of Broadcom’s custom AI chips, called XPUs, by 2025. Additionally, Broadcom revealed that it has acquired two more hyperscaler customers who are in advanced stages of developing their next-gen AI XPUs, which could further boost revenue. Reports suggest these new clients might be OpenAI, creator of ChatGPT, and Apple (AAPL). "We see our opportunity over the next three years in AI as massive, " Tan said during Thursday evening's investor call. Friday's gains brought Broadcom’s annual increase to about 98%, elevated its shares to a record $221, and pushed its market cap over $1 trillion. According to The Information, Apple is collaborating with Broadcom to create an AI server chip. Tech giants aim to produce their server chips to reduce costs and lessen reliance on Nvidia’s (NVDA) GPUs. Similarly, Reuters and Bloomberg report that OpenAI is pursuing a comparable strategy with Broadcom. Broadcom manufactures custom chips for data centers, consumer electronics such as smartphones and laptops, and electric vehicles.

The company has also ventured into enterprise software partnerships with Microsoft (MSFT) and Google (GOOG). However, there is concern that Big Tech might not sustain spending on AI infrastructure if it cannot effectively monetize the technology. OpenAI faced about $5 billion in losses in 2024, and only 4% of US workers regularly use AI, according to a recent Gallup poll cited by Bloomberg. Broadcom's AI chip opportunities stand out from its other semiconductor ventures. In the fourth quarter, overall semiconductor revenue increased 12% from the previous year to $8. 2 billion, concealing a split between AI and non-AI chips. AI chip sales jumped 150% to $3. 7 billion, whereas non-AI semiconductor revenue dropped 23% to $4. 5 billion. "Moving forward, the AI semiconductor business will rapidly surpass the non-AI sector, " Tan stated.