Broadcom Enhances AI Chip Technology

(Reuters) – Broadcom (NASDAQ:AVGO) announced on Thursday its custom chip unit, focused on AI processors for cloud providers, has developed new technology to improve semiconductor speeds due to rising demand for generative AI infrastructure.

Based in Palo Alto, California, Broadcom is a major beneficiary of the strong demand for AI-supporting hardware. Hyperscalers are increasingly using its custom chips to diversify away from Nvidia (NASDAQ:NVDA)’s expensive processors.

The new technology, named 3.5D XDSiP, enables Broadcom's custom-chip clients to increase the memory within each packaged chip and enhance performance by directly linking essential components.

To achieve this, the company employs manufacturing methods from TSMC, the largest contract-chip producer globally. This includes the chip-on-wafer-on-substrate techniques, which are also referred to as advanced packaging, currently facing capacity limitations—a significant bottleneck in the AI chip supply chain.

Broadcom is working on five products utilizing this new technology, with production shipments set to commence in February 2026.

While Broadcom hasn't disclosed the cloud firms for which it is developing custom chips, analysts widely speculate that tech giants such as Alphabet (NASDAQ:GOOGL)'s Google and Meta Platforms (NASDAQ:META), the parent company of Facebook, are among its clients.

"Our hyperscale customers continue to scale up and scale out their AI clusters," said Broadcom CEO Hock Tan in September, when the company updated its AI revenue forecast for fiscal year 2024 to $12 billion, up from the previous $11 billion.

Tan mentioned that the chipmaker has three main customers for its custom processor unit. Broadcom's key competitor in this sector is Marvell (NASDAQ:MRVL). Market projections indicate that the total market for custom chips could reach approximately $45 billion by 2028, with potential sharing between the two corporations, as noted by Marvell COO Chris Koopmans on Tuesday.

The custom chip market is set to expand further, with Summit Insights senior analyst Kinngai Chan stating that both Marvell and Broadcom are poised to benefit from these trends.