Broadcom AVGO and OpenAI unveiled Jalapeño, the latter’s first custom AI inference processor, designed specifically for large language models (LLMs). Developed in just nine months, the chip is optimized for AI inference by balancing compute, memory and networking, with early tests indicating industry-leading performance per watt. Broadcom contributed silicon implementation, Tomahawk networking and system integration to enable large-scale production.
Jalapeño is the first in a multi-generation compute platform that will be deployed in gigawatt-scale data centers beginning in late 2026, supporting OpenAI’s broader strategy to build a full-stack AI infrastructure. The companies said the accelerator is designed to support current and future LLMs across the industry while lowering AI compute costs and improving efficiency. Broadcom expects the collaboration to extend over multiple generations and help power large AI clusters for OpenAI, Microsoft and other partners
The announcement reinforces Broadcom’s long-term AI growth outlook by validating its custom AI accelerator and networking strategy. On its second-quarter fiscal 2026earnings call management disclosed that silicon for OpenAI had already been delivered and remained on track for production in late 2026, with a contractual commitment to deploy 1.3 gigawatts of compute in 2027 as part of a broader 10-gigawatt agreement through 2029.
Broadcom also reiterated expectations for AI semiconductor revenues to exceed $100 billion in 2027, supported by sustained demand from OpenAI and other hyperscale customers. The Jalapeño launch provides tangible evidence that Broadcom’s custom silicon roadmap is progressing as planned and strengthens revenue visibility across multiple years.
AVGO Faces Tough Competition in the Semiconductor Market
Broadcom is facing stiff competition from NVIDIA NVDA and Advanced Micro Devices AMD in the semiconductor space.
NVIDIA is at the center of AI computing, with its products widely used across data centers, gaming and autonomous vehicles. The company’s newer Hopper 200 and Blackwell GPU platforms are being adopted quickly as customers work to grow their AI infrastructure. Data Center revenues reached $75.2 billion in the first quarter of fiscal 2027, up 92% from a year ago and up 21% sequentially, driven by the ramp-up of Blackwell 300 products and demand for InfiniBand, Spectrum-X Ethernet and NVLink solutions.
AMD’s prospects are benefiting from strong demand for EPYC processors that power cloud and enterprise workloads. AMD believes EPYC’s expanding portfolio — including the upcoming sixth-generation Venice family and AI-optimized Verano processors — positions AMD to capture substantial market share gains as hyperscalers deploy broader AI compute architectures. Management indicated that server CPU revenues are expected to grow more than 70% year over year in the second quarter, with strong growth continuing into 2027 as new EPYC products ramp.
AVGO’s Share Price Performance, Valuation & Estimates
Broadcom shares have appreciated 9.5% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 14.2%.
AVGO Stock Lags Sector
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/sales of 12.44X compared with the broader sector’s 6.41X. Broadcom has a Value Score of D.
AVGO Stock Has a Stretched Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AVGO’s fiscal 2026 earnings is pegged at $11.73 per share, up 2.8% over the past 60 days, suggesting 72% growth from the figure reported in fiscal 2025.
Broadcom Inc. Price and Consensus
Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote
Broadcom currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Beyond Nvidia: AI’s Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren’t likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
Broadcom Inc. (AVGO) : Free Stock Analysis Report
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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