Broadcom’s (AVGO) artificial intelligence (AI) story has been closely linked to Alphabet (GOOGL) for years now. The relationship is still getting bigger, with the company now expecting to supply Google with tens of billions of dollars of Tensor Processing Units (TPUs) each year over the next several years. However, Broadcom’s third-quarter earnings call revealed there may be a new customer that is becoming increasingly important for the company.
Who is Broadcom’s next big AI customer and what does it mean for AVGO stock? Let's take a closer look.
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www.barchart.com Anthropic Could Become Broadcom's Biggest XPU Customer
During the Q3 earnings call, Broadcom specifically said that Anthropic is likely to become its largest XPU customer in 2027 and hold that position until 2028. Broadcom expects to deploy 1 gigawatt of Ironwood capacity for Anthropic during 2026. That will be followed by another 5 GW based on TPU version 8i in 2027. Looking ahead, management also sees a path toward another 10 GW in 2028.
Anthropic's requirements are tied to the rapid expansion of frontier AI models, and Broadcom believes the leading developers of these models will need substantially more computing capacity in 2027 and 2028. If this demand materializes, Broadcom’s opportunity for infrastructure will also expand. Furthermore, as AI clusters become larger, networking exposure will give Broadcom another way to benefit. Broadcom said that Tomahawk 6 is being deployed across AI hyperscalers building XPUs with the company, while adoption of its newer Tomahawk Ultra product is beginning in scale-up applications. This makes the Anthropic relationship potentially even more valuable.
In Q3, Broadcom’s AI semiconductor revenue increased 54% sequentially and 221% year-over-year (YOY) to $16.7 billion. AI semiconductors accounted for 56% of total quarterly revenue. The company now predicts $21.7 billion of AI semiconductor revenue in Q4, which would represent 236% YOY growth. This will boost fiscal 2026 AI revenue to $58 billion.
How Does This Benefit Anthropic?
Being Broadcom’s top customer also strengthens Anthropic’s growth story. The company is securing the infrastructure needed to support enormous future AI workloads. Meanwhile, overtaking Google's position within Broadcom's XPU customer base also shows how large its scale has become.
Anthropic’s revenue is already growing at a rapid pace. According to Reuters, the firm's annualized revenue rate (ARR) surpassed $65 billion by July. The company also projects roughly $190 billion to $200 billion in revenue for fiscal 2028.
“It's an open secret Anthropic is well on its way to an IPO. And with that, its investment credit will change,” Broadcom CEO Hock Tan said during the earning call. What Tan is implying is that going public could change Anthropic's credit standing, which could in turn affect how it finances the massive infrastructure buildout required for its planned deployments.
Google No Longer Tells the Whole Story
Although Anthropic is on track to become Broadcom's largest XPU customer, that doesn’t mean its relationship with Google is fading. In fact, the company recently strengthened its long-term agreement covering “future generations of TPUs and AI networking.” Under the agreement, Broadcom will supply Google with TPUs worth billions of dollars annually over several years, with additional generations planned as Google's AI infrastructure expands into 2028 and 2029.
The important thing is that Broadcom’s custom-chip business is spreading across multiple major AI developers rather than remaining dependent on a single hyperscaler. The company now has six XPU customers, including OpenAI and Meta Platforms (META).
On the Q3 earnings call, Broadcom specified that OpenAI will soon begin deploying its first custom accelerator called Jalapeno. The company expects 1.3 GW of deployment in 2027. Beyond that, Broadcom sees more than 5 GW of OpenAI deployments in 2028 across Jalapeno and its “successor generation.”
Broadcom estimates that each GW of compute deployed by these frontier AI companies could potentially support about $30 billion in ARR, which is why the firm sees enabling their infrastructure as economically attractive. Specifically, Broadcom now sees AI semiconductor revenue reaching $115 billion in fiscal 2027 and $230 billion in fiscal 2028. Management said that this is largely tied to expected deployments across its six XPU customers and the supply visibility it has from those relationships.
That said, while these AI revenue targets sound impressive, execution depends on manufacturing capacity, components, memory, data-center construction, and the pace at which Broadcom's six customers can bring their planned systems online. So, investors will need to keep an eye on that.
Wall Street Remains Bullish on AVGO Stock
Overall, Wall Street holds a consensus “Strong Buy” rating for Broadcom stock. Of the 43 analysts covering AVGO stock, 35 have a “Strong Buy,” three have a “Moderate Buy,” and five analysts have a “Hold" rating. Although AVGO stock has gained just 5% year-to-date (YTD), the average target price of $523.53 implies that the stock could surge as much as 44% from current levels. Furthermore, the Street-high estimate of $715 suggests potential upside of 96% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.