- Chipmaker Broadcom is the latest to hop on the generative AI bandwagon, with the company expecting revenues created by deployment of the technology to double over the course of the year, executives said Thursday during the company’s fiscal 2023 second quarter ended April 30.
- While revenues from generative AI represented about 15% of its semiconductor business — and represented only 10% in fiscal 2022, the company believes it will account for over 25% of semiconductor revenue in fiscal 2024.
- “Over the course of fiscal '23 that we're in, we are seeing a trajectory where our quarterly revenue entering the year doubles by the time we exceed '23,” CEO and President Hock Tan said Thursday during the earnings call.
For its fiscal 2023 third quarter ending July 30, the San Jose, California-based company expects its AI revenue to reach $1 billion, Tan said Thursday.
Broadcom — which produces chips and infrastructure software products utilized by data center, wireless and industrial markets, among others — is joining the AI race alongside other chipmakers which are raring to take advantage of the opportunities generated by the hype around the emerging technology.
Separately, the California firm NVIDIA saw a surge in revenue for its most recent quarter driven by rising generative AI demand, NVIDIA executives said, with total revenues increasing 19% from the prior three-month period to $7.19 billion, CFO Dive previously reported.
Attention surrounding generative AI’s potential has pushed NVIDIA’s stock to towering heights in the weeks following its earnings report, with the chipmaker seeing a $650 billion boost in market value since its two-year low in October, with the company briefly cresting a $1 trillion valuation earlier this week, the Wall Street Journal reported Friday.
NVIDIA, as well as Broadcom, is expecting the generative AI surge to continue, projecting $11 billion in revenue for its next quarter, company executives said in May.
However, while Broadcom reported a revenue bump for its most recent quarter, it’s also being impacted by a wider slowdown in sales thanks to economic headwinds including an overall slump in technology demand. Broadcom reported $8.7 billion in revenue for the quarter ending April 30, an 8% increase year-over-year, according to its earnings results.
Despite its projected AI boost, the company is expecting only modest gains for its next coming quarter. “Based on current business trends and conditions,” the company is expecting consolidated revenues of $8.85 billion for its third quarter, CFO Kirsten Spears said during the earnings call. The $8.85 billion would represent a 5% bump year-over-year.
While companies such as Broadcom and NVIDIA — as well as their investors — remain excited over the opportunities generative AI presents, many are also voicing concerns about the potential pitfalls of the new technology.
Both the pros and the cons presented by the technology was a key theme during Broadcom’s Thursday earnings call, with analysts probing for more details about how demand for the technology is increasing, the competitive edge it could add to products and services, and whether spending on AI could potentially “cannibalize” other parts of the chipmaker’s business.
“We do not see cannibalization, but these are early innings, relatively speaking, and budgets don't change that rapidly,” Tan said Thursday, following questions about the company’s future growth by one analyst who pointed out that Broadcom’s projected AI bump until 2024 means advancements in the technology would represent all of the company’s growth.
Outside of its effect on traditional business or computing areas, worries over data privacy, copyright infringement and generative AI’s tendency to “hallucinate”— or to create blatantly false information — are also growing as the technology gets more attention.
It’s critical especially for financial leaders to “always validate” the insights that come out of such solutions, Gartner AI analyst Rajesh Kandaswamy advised CFOs earlier this week during the Gartner CFO and Finance Executive Conference.
CFOs need to play a crucial role in the development of generative AI at their businesses, Kandaswamy said, with finance chiefs more familiar with key business metrics such as its sources of revenue, its highest costs and the opportunities the business wishes to target.