Broadcom's $30 Billion Apple Deal: This Chip Giant Is About More than Just AI

Summary

Semiconductor giant Broadcom NASDAQ: AVGO has made a name for itself as one of the leading players in AI chips. The industry behemoth, NVIDIA NASDAQ: NVDA, is still far and away the world's largest AI chip company. However, Broadcom’s AI sales tower over other top names like Advanced Micro Devices NASDAQ: AMD and Intel NASDAQ: INTC. Broadcom Today$400.22 -0.89 (-0.22%) As of 10:10 AM Eastern This is a fair market value price provided by Massive. Learn more.52-Week Range$269.58▼$495.00Dividend Yield0.65%P/E Ratio66.60Price Target$493.24 Broadcom is far more than just an AI chip company. Its latest deal with tech giant Apple NASDAQ: AAPL, which has an expected value of over $30 billion, clearly demonstrates this.Get Broadcom alerts:Sign Up With this long-term engagement, Broadcom is locking up sales from its most critical non-AI chip customer for years to come. Apple is also the world’s leading consumer device company, once again demonstrating Broadcom's prowess in attracting the world’s technology leaders. The deal serves as a reminder that investors should not view Broadcom solely through the AI lens. Although heavily tied to the AI trade, investors would be remiss not to recognize its standing outside of AI when evaluating the company and its stock. Apple: Broadcom’s Non-AI Chip EngineTo understand the significance of this deal, it is important to understand the breakdown of Broadcom’s revenue streams. Broadcom reports three key revenue lines: AI semiconductors, Infrastructure Software, and Non-AI Semiconductors. Its relationship with Apple falls squarely within the non-AI semiconductor segment, with the firm as an anchor customer. Apple has been a long-standing Broadcom customer, first using Broadcom chips back in 2009 for the iPhone 3GS. While Non-AI Semiconductors is Broadcom’s smallest segment, it is still a key revenue stream for the company. At $4.2 billion last quarter, it represented approximately 19% of its total $22.19 billion in sales. Past statements ma...