Broadcom Suffers Sales Slowdown, Even as It Points to AI Gains

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(Bloomberg) -- Broadcom Inc., one of the world’s biggest chipmakers, said that artificial intelligence spending is helping fuel sales, but not enough to offset a broader post-pandemic slowdown.

Revenue in the fiscal third quarter will be about $8.85 billion, up 4.6% from a year earlier, the company said in a statement Thursday. Though that tops the analyst estimate of $8.76 billion, it would represent its slowest growth in years. The shares slid in late trading.

On the plus side, the forecast suggests that Nvidia Corp. isn’t the only chipmaker benefiting from the AI frenzy. Broadcom’s networking components help direct traffic between computers in giant data centers, and it’s a maker of custom chips for some of the biggest cloud computing providers. Those customers have been racing to add more capacity to handle demand for AI services — a trend that helped send Nvidia near the $1 trillion valuation threshold this week.

But Broadcom is still contending with a industrywide slump in tech demand, and its sales growth has decelerated sharply since a pandemic-fueled surge in recent years.

“Our third quarter outlook projects year-over-year growth, reflecting continued leadership in networking as we support a measured ramp into large scale AI networks,” Chief Executive Officer Hock Tan said in the statement.

The shares fell more than 3% in late trading after the report was released. They had closed at $789.95 in New York, leaving them up 41% this year. That made them one of the best-performing semiconductor stocks in 2023.

Tan had warned analysts and investors that pandemic boom times wouldn’t last. The shortages of the past few years have given way to an inventory glut in some areas, prompting customers to put off new orders.

Broadcom’s chips go into smartphones and home networking — in addition to data centers — making it a bellwether for across a wide swath of tech spending. The company had previously said it would have full order books for the rest of the fiscal year, which ends in October.

©2023 Bloomberg L.P.

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