Broadcom’s AI Push: Can It Overcome Software Concerns?

Broadcom (AVGO) is navigating a critical juncture as it seeks to reassure investors that its burgeoning artificial intelligence (AI) business can offset anxieties surrounding its software segment. While historically recognized as a leading chipmaker, Broadcom’s expansion into software, largely through the 2023 acquisition of VMware, has introduced new investor concerns, particularly as the market assesses the potential disruption AI poses to traditional software vendors.

The Software “Curse” and Investor Sentiment

Broadcom’s stock has faced headwinds due to investor apprehension about its exposure to software sales. The company’s transformation into a software powerhouse – with software accounting for 39% of revenue in the prior quarter [1] – is now viewed with more scrutiny. Investors are questioning the sustainability of Broadcom’s valuation in light of AI’s potential to disrupt established software models.

AI as a Potential Offset

Despite these concerns, Wall Street analysts believe Broadcom’s accelerating AI sales could provide a crucial counterbalance. The company is expected to report fiscal first-quarter results on Wednesday, with AI-related sales potentially showing significant growth. Oppenheimer’s Rick Schafer forecasts a 30% sequential growth in AI sales, building on a 25% growth rate in the previous quarter [1]. Cantor Fitzgerald’s C.J. Muse suggests that AI can continue to offset concerns about software exposure [1].

Key Developments in AI Partnerships

Broadcom has secured significant AI-related deals, including a multi-billion-dollar agreement with OpenAI to co-develop a custom accelerator for internal use, targeting mass production in 2026 [3]. This partnership, if confirmed, would diversify OpenAI’s chip supply chain beyond a single GPU provider and provide Broadcom with long-term revenue visibility, similar to its existing relationship with Google and its Tensor Processing Units (TPUs) [3].

Recent Financial Performance

In its Q3 2025 earnings report, Broadcom reported record sales of $15.95 billion, a 22% increase, with AI revenue reaching $5.2 billion, a 63% increase [3]. The company guided Q4 revenue to $17.4 billion, with AI revenue projected at $6.2 billion [3].

Broadcom’s Q4 2025 earnings, reported on December 11, 2025, also exceeded expectations, with revenue reaching $18.02 billion and earnings per share at $1.95 [4]. The company anticipates AI chip sales will double year-over-year in the current quarter to $8.2 billion [4]. Infrastructure software also showed strong growth, increasing 26% to $6.94 billion in sales [4].

Looking Ahead

Broadcom’s success in overcoming investor concerns hinges on its ability to demonstrate sustained growth in its AI business and effectively integrate its software offerings. The company’s strategy focuses on custom AI chips, Ethernet technology, and VMware subscriptions. The market will be closely watching Broadcom’s upcoming earnings reports and guidance to assess whether it can break the “software curse” and solidify its position as a key player in the AI revolution.