Broadcom AI Networking Chip Revenue to Reach Over $45B in FY2027, Up More Than 2x

Overview

J.P. Morgan maintains Broadcom's buy rating, forecasting over 2x growth in FY2027 AI networking chip revenue to exceed $45 billion, representing 28% of total AI revenue. Broadcom maintains its leading position in the AI networking chip segment through its 2-year chip upgrade cycle and market share exceeding 70%.

Core views

Broadcom maintains absolute leadership in AI networking chips with a market share of approximately 70%, continuously advancing its technology via a 2-year upgrade cycle that doubles performance every two years (2x Moore's Law). The current Tomahawk 5 (5nm, 51.2Tbps) is already in mass production, and next-generation Tomahawk 6 (3nm, 102.4Tbps) is accelerating toward production. It is expected that AI networking chip revenue will reach over $45 billion in FY2027 (growth >2x YoY), accounting for 28% of Broadcom's total AI revenue. Broadcom's network chips are applied in the AI clusters of major global cloud service providers such as Google, Amazon, Meta, Microsoft, Alibaba, Oracle, ByteDance, Tencent, including those of Anthropic and OpenAI. It is projected that Broadcom's network chip business will grow at a compound annual growth rate of over 50% in the coming years due to its technological leadership and strong R&D capabilities, maintaining a market share of over 70%.

Analysis framework

J.P. Morgan evaluates Broadcom's leadership in AI networking chips by analyzing its chip upgrade cycles, market share, customer applications, and future product roadmap. The report emphasizes the core competitive advantage of Broadcom's 2-year performance improvement strategy (doubling performance every 2 years) and validates its technological leadership by comparing shipment timing differences with competitors like NVIDIA and Marvell. Additionally, the report notes that Broadcom has begun designing the next-generation Tomahawk 7 chip at 2nm, further consolidating its technological edge.

Methodology notes

• Industry/sector analysis framework

  Technology Iteration Analysis (Performance Doubles Every 2 Years)

  The report employs a technology iteration analysis approach, emphasizing that Broadcom achieves a 2x performance increase every 2 years (similar to Moore's Law), which serves as a core indicator for assessing its technological leadership.

Key data

• FY2027 AI Networking Chip Revenue$45B+Growth >2x YoY, accounts for 28% of total AI revenue
• Network Chip Revenue Growth in FY2027>50%+Projected to continue growing in the coming years
• Market Share70%+In cloud/super-large data center switch/routing chip market
• Chip Performance Improvement Cycle2 yearsPerformance doubles every 2 years (2x)
• Target Price$500.00Based on FY2027 EPS of $20.45, 24.5x valuation

Impact & implications

Broadcom's technological leadership in AI networking chips will continue to expand, with expected revenue exceeding $45 billion in FY2027, accounting for 28% of its total AI revenue. As AI infrastructure continues to expand, Broadcom's network chip business is poised for compound annual growth exceeding 50% in the coming years, further solidifying its industry leadership. The report suggests that Broadcom's technology roadmap and product iteration capabilities will maintain its competitive edge in the next-generation networking chip market.

Risks

• Unexpected negative macroeconomic or regional market shocks could alter demand, affecting Broadcom's product demand

What to watch

• Development and launch progress of next-generation 2nm Tomahawk 7 chip
• Growth trajectory of the AI networking chip market