Tech stocks led Wall Street higher Friday morning as Broadcom (AVGO) jumped to all-time highs after the chipmaker predicted an AI-driven sales surge. The S&P 500 (^GSPC) rose 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) gained 0.5%. The Dow Jones Industrial Average (^DJI) hovered near the flatline.
Broadcom’s bullish forecast helped brighten the mood. The chip maker’s market cap surpassed $1 trillion for the first time after executives predicted an AI sales gain of around 65%, a much brisker pace than expected.
Broadcom’s peers rallied in tandem. Marvell Technology (MRVL) was up over 5%, while AMD (AMD) and chip titan Nvidia (NVDA) rose more modestly.
The moves position the Nasdaq for a strong weekly gain, as the index had notched a record close on Wednesday while finishing above the milestone level of 20,000 for the first time.
While tech has led the way this week, the Dow has struggled, partly on the back of a continued plunge in UnitedHealth (UNH) shares as the insurance industry continues to grapple with the fallout of the UnitedHealthcare CEO’s fatal shooting. Shares of the healthcare giant are down over 15% in the week since the shooting.
Meanwhile, the last pieces of economic data have teed up another rate cut from the Federal Reserve next week. But persistently sticky inflation could force the Fed to tread more slowly next year.
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Broadcom soars 21% to surpass $1 trillion market cap
Broadcom’s (AVGO) market cap surpassed $1 trillion for the first time on Friday.
The stock soared as much as 21% to all-time highs on the heels of the chip maker’s better than expected forecast sending the company’s valuation past $1 trillion for the first time.
Investors were most enthusiastic about over CEO Hock Tan’s comments following the company’s quarterly results on Thursday.
“We see our opportunity over the next three years in AI as massive,” Tan said during Broadcom’s earnings call.
Broadcom’s rally sent chip peers higher during the session.
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S&P 500, Nasdaq rise as chip stocks rally
Tech stocks led the major averages higher on Friday after Broadcom (AVGO) forecast a boom in AI driven sales.
The S&P 500 (^GSPC) rose 0.2%, while the tech-heavy Nasdaq (^IXIC) gained 0.7%, The Dow Jones Industrial Average (^DJI) hovered near the flatline.
Broadcom shares rose 18% after the company’s bullish forecast helped the semiconductor sector rally with peers Marvell Technology (MRVL), AMD (AMD) and AI chip giant Nvidia (NVDA) all rising.
Friday’s gains come after the major averages slipped in the prior session over concerns that sticky inflation may deter Fed officials from cutting rates at their policy meeting next week.
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Broadcom surges on ‘massive’ AI opportunity
Shares of chipmaker Broadcom (AVGO) soared over 17% premarket Friday after the company touted its “massive” AI opportunity in its earnings report the prior evening.
Broadcom reported earnings Thursday after the bell. Its quarterly earnings per share of $1.15 were slightly above the $1.12 forecast, and its revenue of $14.1 billion was in line with expectations.
Bernstein analyst Stacy Rasgon wrote in a note early Friday that the results were “decent,” with Broadcom’s strength coming from “stronger AI revenue.”
What appeared to jolt investors, however, was CEO Hock Tan’s comments about its lofty forecast.
“We see our opportunity over the next three years in AI as massive,” Tan said in a call with investors Thursday evening.
Rasgon wrote: “They [Broadcom management] went out of their way to give investors a reason to dream, painting a 3 year (2027) picture with potential $60B-$90B AI revenue opportunity from current customers (likely pointing to material upside vs current AI expectations for the company), and with more possible given two new potential customers currently engaged, if not yet ramping.”
Citi analyst Christopher Danely wrote Friday that the two new customers are likely OpenAI and Apple (AAPL). Rumors of those partnerships were previously reported in Bloomberg and The Information.
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