Broadcom (AVGO) stock jumped on Monday after the fabless chipmaker announced a deal to supply AI processors for artificial intelligence leader OpenAI. Broadcom’s deal follows similar OpenAI arrangements with chip rivals AMD (AMD) and Nvidia (NVDA).
Under their “strategic collaboration,” OpenAI plans to deploy 10 gigawatts of AI accelerators designed with Broadcom. A gigawatt is a measure of power that is increasingly being used to describe the biggest clusters of AI processors. The multiyear partnership also includes Broadcom’s networking technology.
The first wave of Broadcom systems will be deployed in the second half of 2026, the companies said. The deployments are expected to be complete by the end of 2029.
“Partnering with Broadcom is a critical step in building the infrastructure needed to unlock AI’s potential and deliver real benefits for people and businesses,” Sam Altman, cofounder and CEO of OpenAI, said in a news release. “Developing our own accelerators adds to the broader ecosystem of partners all building the capacity required to push the frontier of AI to provide benefits to all humanity.”
In morning trades on the stock market today, Broadcom stock advanced more than 10% to 357.89.
Shares of chip foundry Taiwan Semiconductor Manufacturing (TSM), better known as TSMC, rose more than 7% to 301.12. TSMC produces chips designed by Broadcom, AMD and Nvidia.
Last week, OpenAI signed a deal with AMD for 6 gigawatts of AI processing power. And on Sept. 22, OpenAI signed a deal with Nvidia for 10 gigawatts of AI processors.
OpenAI also has announced supply agreements recently with memory-chip makers Samsung and SK Hynix.
OpenAI Called ‘Center Of AI Universe’
OpenAI’s enormous capital spending plans present risks and rewards for computer hardware firms, Mizuho Securities analyst Vijay Rakesh said in a report Sunday. But, for now, the positives outweigh the potential negatives, he said.
Rakesh reiterated his outperform ratings on three AI stocks with exposure to OpenAI: AMD, Broadcom and Nvidia. He kept his price target of 410 on Broadcom but raised his targets for AMD and Nvidia.
Rakesh lifted his target on AMD stock to 275 from 205 and upped his target on Nvidia stock to 225 from 205.
Rakesh called OpenAI “the center of the AI universe” with its heady capital expenditure plans.
“We think the current wave of AI capex and AI funding headlines is largely driven by OpenAI, which is also driving investor circularity concerns especially with overlapping neocloud and in-house partnerships,” Rakesh said.
OpenAI is on track to spend $700 billion on AI computing infrastructure by 2030, Rakesh said.
Broadcom stock is on the IBD Tech Leaders list along with AMD, Nvidia and TSMC.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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