How will Broadcom (AVGO) benefit from the rise of AI?

Broadcom's expertise in developing application-specific integrated circuits (ASICs) makes it well-positioned to capitalize on the increasing demand for custom AI chips, as major companies look to break away from Nvidia's dominance and reduce costs.

What is the threat to "seat-based" software models?

Analyst Ben Reitzes believes that AI-powered "agents" will be able to perform many tasks more efficiently, reducing the need for traditional software seats and threatening seat-based business models.

Which companies are expected to thrive in the AI-driven shift?

According to the analyst, infrastructure software providers and cloud companies hosting and deploying AI models are likely to benefit, while traditional software-as-a-service (SaaS) companies may face challenges.

Home / Business and Economy / Broadcom Tipped as AI Chip Winner as Software Seats Face Disruption

Broadcom Tipped as AI Chip Winner as Software Seats Face Disruption

24 Jul

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Summary

AI chip companies to benefit from rise in LLM and inference usage
Seat-based software models under threat, outcome-based models rewarded
Broadcom's ASIC chips well-positioned to meet demand for custom AI chips

Broadcom Tipped as AI Chip Winner as Software Seats Face Disruption

According to a recent analysis by Melius Research, the rise of AI and large language models (LLMs) is set to disrupt traditional software business models. Analyst Ben Reitzes believes that "seat-based" software models are under threat, as AI-powered "agents" will be able to perform many tasks more efficiently.

This shift is expected to benefit AI chip companies, as the demand for custom silicon to power these AI models increases. Reitzes specifically named Broadcom Inc (NASDAQ:AVGO) as a company well-positioned to capitalize on this trend. Broadcom's expertise in developing application-specific integrated circuits (ASICs) - chips designed for specific tasks - makes it an attractive partner for major AI spenders looking to break away from Nvidia's dominance and reduce costs.

The analyst noted that many top AI companies are already teaming up with Broadcom to develop these high-margin, high-volume ASIC chips, which could drive substantial growth in both revenue and profits for the semiconductor firm. This shift towards outcome-based models and custom AI hardware is expected to benefit infrastructure software providers, while posing challenges for traditional software-as-a-service (SaaS) companies.

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