- Bull Street
- Posts
- 📈 Broadcom's AI Goldmine
📈 Broadcom's AI Goldmine
Broadcom's under-the-radar strategy of crafting bespoke silicon for Google and Meta has positioned it to potentially capture $40 billion in annual revenue by 2027
Evelio Silvera
September 05, 2025
Good Morning…
While Wall Street obsesses over Nvidia's GPU dominance, the real AI fortune may be hiding in plain sight at a company that's quietly become the custom chipmaker to tech's biggest spenders.
🔎 Market Trends → S&P notches record-high close as data keeps rate cut views intact
🖥️ Market Movers from Fintech.tv → [WATCH] Revving Up: Infiniti’s Bold New Direction in Luxury SUVs
And now…
⏱️ Your 5-minute briefing for Friday, September 5, 2025:
MARKET BRIEF
Before the Open
As of market close 09/04/2025.
Pre-Market
| 
|
Fear & Greed
Markets in Review
Soft jobs, solid gains: markets bet on a “Goldilocks” print
S&P 500 +0.83% to 6,502 (record), Nasdaq +0.98% to 21,707, Dow +0.77% to 45,621 — breadth improved as yields eased.
The Big Picture:
A cooler ADP (+54k vs. 75k est.) nudged odds of a September Fed cut to ~97%, letting stocks climb without screaming “recession.” Long yields slipped after flirting with 5% on the 30-year, easing the multiple pressure that kept mega-cap tech in check.
Investors want a Friday payrolls print that’s not too hot, not too cold. Today’s jobless claims (237k) said “slowing, not stalling,” while ISM services at 52.0 signaled the economy still expands.
Commodities stayed a tailwind: crude is down >10% YTD, pressuring producers (see COP) but lowering inflation beta for everything else. The “oil tax” on consumers remains light; that supports discretionary spend and margins.
Market Movers:
Amazon (AMZN) +4%: The Anthropic tie-up keeps AWS in the AI revenue slipstream.
Homebuilders (XHB, ITB) +~2%: Lower long rates revive affordability math.
Credo (CRDO) +10% / Ciena (CIEN) +18%: Plumbing for AI and bandwidth.
Salesforce (CRM) −7% pre/−5% close-ish: Soft guide trumps beat.
ConocoPhillips (COP) −4%: Workforce cuts follow weaker crude tape.
What They’re Saying:
“The Fed’s free pass on the labor market has ended… the rate of positive change has slowed, so expect the Fed to tilt to a September cut.” — Jamie Cox, Harris Financial Group
WHAT WE’RE WATCHING
Events
Today: Bureau of Labor Statistics - Average Hourly Earnings m/m - 8:30am
Why You Should Care: It's a leading indicator of consumer inflation - when businesses pay more for labor the higher costs are usually passed on to the consumer;
Today: Bureau of Labor Statistics - Non-Farm Employment Change - 8:30am
Why You Should Care: Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity;
Today: Bureau of Labor Statistics - Unemployment Rate - 8:30am
Why You Should Care: Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy;
Earnings Reports
Today: ABM Industries Incorporated
Monday: Oracle
MARKET INSIGHTS
Leading News
Broadcom's AI goldmine could mint $40B by 2027
Photo Credit: Bloomberg
Why it matters:
The chipmaker (AVGO) sits at the profitable intersection of AI's biggest players, crafting custom silicon that's cheaper than Nvidia's while pocketing massive margins.
Zoom Out:
Broadcom has become the AI arms dealer you didn't see coming. While everyone obsessed over Nvidia's GPUs, CEO Hock Tan quietly built relationships with Google and Meta, designing bespoke chips that run their AI programs more efficiently.
The company's XPU accelerators offer hyperscalers a compelling value proposition: similar performance to Nvidia's chips at lower operational costs. That's music to CFO ears when AI spending hits $200 billion annually.
VMware's $61 billion acquisition in 2023 wasn't just empire-building—it created a software moat that now generates 44% of revenue, providing steady cash flow to fund chip R&D.
Key Insights:
Custom silicon revenue could explode from current levels to $25-30 billion next year and $40+ billion by 2027, per Cantor Fitzgerald
AI revenue jumped 46% last quarter to $4.4 billion, with management guiding to $5.1 billion this quarter
Stock has doubled in 12 months to a $1.4 trillion market cap—but still trades cheaper than Nvidia on forward metrics
Market Pulse:
"All eyes will turn towards any visibility of current AI Custom Silicon engagements converting into customers with high-volume ramps" —Cantor Fitzgerald analysts
Bull’s Take:
Broadcom's diversified AI play beats pure-GPU exposure while its software moat provides downside protection. Smart money follows the picks-and-shovels strategy—and AVGO sells both the shovels and the maps.
Market Stories of Note
Lululemon's Athletic Earnings Get Crushed by Trade Tariffs:
The athleisure giant beat Q2 earnings estimates but warned that $240 million in tariff headwinds will pressure full-year profits, sending shares tumbling over 10% despite solid international momentum. This latest stumble highlights how even premium brands aren't immune to the peculiar intersection of trade policy and yoga pants economics. Smart investors might view this tariff-induced selloff as an opportunity to acquire shares in a company whose international growth story remains largely intact, even as domestic sales face temporary headwinds.
Palo Alto CEO Spots Gold in the Credential Chaos of AI Browsers:
The cybersecurity titan's chief sees a massive opportunity as agentic AI browsers create unprecedented security headaches for enterprises unwilling to hand over their "crown jewels" to autonomous digital agents. His prediction that companies will ban these AI-powered browsers within 24 months unless proper credential controls emerge perfectly sets up Palo Alto's $25 billion CyberArk acquisition as a strategic masterstroke. Smart investors should recognize that in the AI arms race, the companies building the guardrails often profit more consistently than those building the weapons.
CRYPTO
Fear & Greed
