Meta -Platforms and Google have just shared fantastic news for Broadcom -Investors
Big Tech is planning enormous expenses that in 2025 Spree Spree Spree. Four of the largest technology companies in the world focus on a combined $ 320 billion in capital expenses (Capex) this year, and most expenditure will go to building and refreshing artificial intelligence (AI (AI (AI) data centers for training and training and The use of generative AI.
Nvidia(Nasdaq: NVDA) is certainly a big winner of all those expenses. Almost all major technology companies repeated the importance of their relationships with the leading designer of graphic processing units (GPUs). But comments from the management of Meta platforms and Google Parent Alphabet suggested a bright future for another chip maker.
Widthcom(Nasdaq: AVGO) Could eventually become a big winner of the increase in spending by Big Tech in 2025 and then. This is what Meta and Google said, and what it means for Broadcom investors.
Image source: Getty images.
Broadcom makes many different types of semiconductors. When it comes to AI data centers, it plays an essential role. It makes chips for network switches, the devices that ensure that data moves quickly and efficiently under servers. In fact, the Broadcom chips ensure that the Nvidia chips work as effectively as possible in the data centers of Meta and Google.
But Broadcom also makes some other chips that Meta and Google implement in their data centers. The technology is located behind the adapted AI chip of Meta, the Meta Training and Inference Accelerator (MTIA).
In the meantime, Google has been working with Broadcom since 2015 to develop its Tensor Processing Unit (TPU). Both Meta and Google had good things to say about their adapted chips during their profit calls in the fourth quarter.
During Meta's call, Chief Financial Officer Susan Li said to analysts: “In 2024 we started using MTIA in our ranking and recommendation influencing the workload for advertisements and organic content. We expect MTIA's acceptance for these Use Cases in 2025 to further increase. “
In the long term, Meta sees his chips more and more of his AI data centers from Nvidia and general GPUs. “Next year we hope to expand MTIA to support some of our core -training workload, and over time, some of our Genai -use Cases,” Li said later in the call.
Alphabet CEO Sundar Pichai said that in the fourth quarter we “we saw a strong uptake of trillium, our sixth generation TPU.” The company only launched its latest TPUs to the general public in December, so that developers yield use less than three weeks before the end of the quarter. So the comments suggest that 2025 could be a large year for TPUs.
Custom AI Accelerator chips are more efficient than general GPUs for many types of AI workload. While Big Tech scales up his data centers, the development of small efficiency can have a major impact on the bottom line. As a result, expanding the use for adapted chips and having complete control over the technology stack is becoming increasingly important as the capex budgets grow.
Alphabet and Meta are not the only companies that collaborate with Broadcom to build adapted AI accelerators. Tiktok parent company Bytedance is one of the three largest customers. And during the profit call of the fourth quarter, Broadcom Management announced two new customers to build their own chips from the next generation with his help. Many believe they are Apple and openi.
Apple is particularly a fan of the Broadcom chips. It used the TPUs of the previous generation of Google to train its Apple Intelligence system last year. A push from Apple to take more control over the AI training and development can quickly make it into one of the largest customers of Broadcom.
The company expects that the market for adapted AI accelerators will grow between $ 60 billion and $ 90 billion within three years. Last year Broadcom accounted for around 70% of the adapted AI accelerators and generated around $ 12 billion in sales.
For reference, the total turnover in his diversified activities for 2024 was only $ 51.6 billion, so only the growth in AI chips could almost double its turnover if it maintains its share in the market.
But even with a bright future, appreciation is still important. The shares of Broadcom transactes 37 times income from this letter. And although the chip maker is ready to see very strong profit growth in the coming years, it is difficult to justify paying such a premium for the shares.
If the share price amounted to a value that is closer to 30 times 2025 income, it may be worth buying, since analysts expect more than 30% profit growth this year, making it a price/profit-growth ratio of about 1 Or if the approval of the modified chips from Broadcom appears to be even stronger than expected at the moment, because Meta and Google want to expand the use in their data centers, it could grow to that appreciation.
Broadcom is certainly a company and a share to keep an eye on investors who are interested in the future of artificial intelligence. But at the moment it is too expensive to recommend buying.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and Sister of Meta Platforms CEO Mark Zuckerberg, is a member of the Motley Fool's Board of Directors. Suzanne Frey, a director of Alphabet, is a member of the board of directors of the Motley Fool. Adam Levy has positions in alphabet and meta platforms. The Motley Fool has positions and recommends alphabet, meta platforms and nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Meta platforms and Google just shared fantastic news for Broadcom Investors was originally published by The Motley Fool
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