Broadcom (AVGO +0.86%) stock is climbing Thursday following new contract news. The company's share price was up 1.9% as of 11 a.m. ET, according to data from S&P Global Market Intelligence. The stock had been up as much as 4% earlier in the daily session, but it pulled back in subsequent trading in conjunction with moves for the broader market.
NASDAQ: AVGO
Key Data Points
According to a report published by Benzinga today, Broadcom has won new contracts to provide application specific integrated circuits (ASICs) for artificial intelligence (AI). The report cites coverage from J.P. Morgan analyst Harlan Sur and states that the semiconductor company has secured major contracts to provide chips to OpenAI -- the company behind ChatGPT.
Broadcom is racking up AI wins
According to Sur, Broadcom has been selected by OpenAI to deliver first-generation and second-generation ASIC AI chips. The news comes on the heels of reports and announcements that the semiconductor company is also providing ASICs designed for artificial intelligence to Alphabet, Meta Platforms, and ByteDance -- the company behind the popular social-media app TikTok. Sur notes that Broadcom has also secured a fifth, as of yet unnamed, customer for ASIC AI chips.
What's next for Broadcom stock?
Broadcom's sale of ASIC AI chips to OpenAI and its undisclosed new partner will ramp up in 2026. The company's new 2 nanometer and 3nm platforms appear to be delivering wins, and improvements to transistor density, performance, and power consumption could help attract additional customers.
Thanks to strong business performance and an encouraging outlook in AI, Broadcom stock has rallied roughly 51% year to date. The performance has pushed the company's forward price-to-earnings ratio above 35.
AVGO PE Ratio (Forward) data by YCharts
While the company trades at a growth-dependent valuation, Broadcom has strong competitive positioning in its corner of the AI chip market and additional advantages created by its software businesses. With signs that the company is still in the early stages of benefiting from AI-related tailwinds, the stock continues to look like a worthwhile investment even after some big gains this year.
