For several years now, Broadcom has proven its ability to reinvent itself in order to expand into critical segments, becoming the benchmark in them. Initially focused on network chips for telecommunications and mobile devices, the group has expanded its scope to include specialized ASICs for AI and, since the acquisition of VMware, infrastructure management software. This is a deliberate move upmarket.

A well-established industrial strategy

In a recent article on the company's financial management, we wrote about Broadcom's "relentless strategy." The title also applies to the group's technological dimension. Divided into three segments, Broadcom develops several cutting-edge technologies for a handful of carefully selected customers.

The company's core business remains rooted in industrial chips and network solutions, particularly for telecommunications. These include Wi-Fi 6/6E/7 modems and 5G components for smartphones. The contract signed with Apple alone accounts for nearly 20% of revenue. This is a cyclical segment, dependent on manufacturers' schedules and the telecommunications market.

In AI, Broadcom offers two major product lines: ASICs (application-specific integrated circuits) and network chips. The latter include Tomahawk switches (server interconnections) and Jericho routers (connections between data centers). In ASICs, Broadcom is working on the Ironwood TPU, which is tailor-made for Alphabet.

Since acquiring VMware in late 2023, Broadcom is no longer limited to pipes. It also provides the software that runs the infrastructure. This shift to SaaS generates recurring revenue and therefore offers greater visibility to investors.

A response to the limitations of AI

Artificial intelligence is evolving rapidly, and new bottlenecks are emerging. After raw power, two issues are coming to the fore: bandwidth and energy consumption. Broadcom is well equipped to tackle both of these challenges.

In early June 2025, the group unveiled its new Tomahawk 6 (TH6) chip, capable of doubling bandwidth to 102.4 terabits per second, compared with 51.2 for the previous version. As an added bonus, it offers improved energy efficiency thanks to finer engraving and optimized flow management. A true two-in-one solution.

In the same vein, Broadcom is betting on CPO, or co-packaged optics. The idea is to integrate optical modules directly into chips in order to overcome the limitations of copper. This is the same kind of breakthrough as the transition from ADSL to fiber optics. The technology is expected to be key to the AI of tomorrow, and Broadcom already has a schedule and products on the market.

The risks

  • Overly dispersed capital allocation: Broadcom is led by Hock Tan, a strategist known for his acquisitions, but who also maintains a high dividend, pursues share buyback plans, and invests heavily in R&D... not to mention the debt associated with the VMware acquisition.
  • Launches must go smoothly: between the Tomahawk 6 and Ironwood for Google, any delays would be unwelcome.
  • Apple wants to fly solo: The announced end of the contract with Apple, which accounts for 20% of revenue, would create a difficult hole to fill.
  • Strong dependence: customer concentration ensures healthy margins... but makes the company very vulnerable to the slightest disruption.

 

The expectations

  • Software development: by focusing on recurring revenue via SaaS, Broadcom is seeking to smooth out the cyclical nature of its semiconductor business.
  • A role in 6G: Jensen Huang (Nvidia) mentions 6G? We bet Broadcom will be in the loop.
  • Google and Ironwood: the chip designed for Google is expected to be extremely powerful. If so, it could be a significant source of revenue in the years to come.
  • A clear and ambitious roadmap: with the CPO, Broadcom can position itself at the heart of the next AI revolution. But it still has to deliver on its promise.

Once again, Broadcom has skillfully positioned itself in the most dynamic segment of the sector, artificial intelligence. This presence, coupled with expansion in software, has enabled its valuation to quadruple in ten years, further proof of the talent of its management. In the short term, the market wants to see whether the software division can continue to grow and whether Google's TPU lives up to its promises. In the meantime, the share price has risen by another 40% in six months, demonstrating investor confidence, which is widely shared by our editorial team.