Shares of Broadcom (AVGO +2.57%) climbed on Tuesday, rising as much as 4.1%. As of 2:43 p.m. ET, the stock was still up 3.7%.
While there was no company-specific news driving the gains, the catalyst that sent the semiconductor specialist higher was robust results from another key player in artificial intelligence (AI) -- Palantir Technologies (PLTR 6.85%).
Image source: The Motley Fool.
Soaring demand for AI
Palantir delivered what was arguably its best quarterly financial performance ever, and investors see that as a signal that Broadcom's stellar run could continue.
In the first quarter, Palantir generated revenue that rose 85% year over year to $1.63 billion, driving adjusted earnings per share (EPS) to $0.33, up 154%.
For context, analysts' consensus estimates called for revenue of $1.54 billion and adjusted EPS of $0.28, so Palantir surpassed both estimates by a wide margin.
The results for the company's U.S. commercial segment were even more impressive, as revenue surged 133% to $595 million, driven by strong demand for its Artificial Intelligence Platform (AIP). Results for the U.S. government segment were also robust, as revenue grew 85% to $687 million.
NASDAQ: AVGO
Key Data Points
Nice, but what does this have to do with Broadcom?
Broadcom isn't scheduled to report its second-quarter results until June 3, but investors see Palantir as an important proxy for ongoing AI demand.
Moreover, since Broadcom released its Q1 results, the company has announced expanded collaborations with Alphabet and Meta Platforms. Broadcom is a key architect in the design and production of Google's Tensor Processing Units (TPUs) and is helping develop Meta's Training and Inference Accelerator (MTIA) chips.
Taken together, the available information suggests strong demand for AI. Finally, at 23 times next year's expected earnings, Broadcom provides investors with a picks-and-shovels way to invest in the AI revolution.
