Broadcom shares (AVGO) rose more than 20% on Friday after the chipmaker touted its “big” opportunity in the artificial intelligence market in a quarterly earnings call the night before.

Broadcom CEO Hock Tan said the company expects its custom AI chips to generate between $60 billion and $90 billion in revenue over the next three years from its three existing hyperscaler customers, which the company named not named. Tan reiterated his belief that each of the three hyperscalers will deploy 1 million clusters of its custom AI chips called XPUs by 2025.

Broadcom also confirmed that it has acquired two additional hyperscaler customers that are “in advanced development of their own next-generation AI XPUs,” which could generate further revenue. Media reports citing anonymous sources have suggested that these new customers could be ChatGPT maker OpenAI and Apple (AAPL).

“We see our opportunity in AI over the next three years as enormous,” Tan said in the conference call with investors on Thursday evening.

Broadcom’s gain on Friday boosted the company’s earnings by about 98% this year, sending its stock price to an all-time high of $221 and pushing its market capitalization past $1 trillion.

According to The Information, Apple is reportedly working with Broadcom to develop an AI server chip. The tech giants’ move to make their own server chips is expected to cut costs and reduce their reliance on Nvidia’s (NVDA) GPUs (graphics processing units). OpenAI is reportedly making a similar move in collaboration with Broadcom, according to Reuters and Bloomberg.

Broadcom makes custom chips for data centers, consumer electronics such as smartphones and laptops, and electric vehicles. The company has expanded into enterprise software development through partnerships with Microsoft (MSFT) and Google (GOOG).

Still, there is concern that large tech companies may not be able to sustain their spending on AI infrastructure if they cannot meaningfully monetize the new technology. According to a recent Gallup poll cited by Bloomberg, OpenAI suffered losses of around $5 billion in 2024. And only 4% of U.S. workers actually use AI on a daily basis.

Broadcom’s opportunities in AI chips are not reflected in the other areas of its semiconductor business. Overall, fourth-quarter semiconductor sales rose 12% year-over-year to $8.2 billion. However, this obscured a divergence between its AI chips and non-AI chips. AI chip sales rose sharply by 150% to $3.7 billion, while non-AI semiconductor sales fell 23% to $4.5 billion.

“The reality for this company is that the AI ​​semiconductor business will quickly surpass the non-AI semiconductor business,” Tan said.

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This trend is reflected throughout the industry. According to consulting firm International Business Strategies, which tracks industry data, the AI ​​chip market is expected to grow 74% in 2025, while the semiconductor market as a whole is expected to grow just 12% next year. IBS data shows that the AI ​​chip market – also known as the accelerator chip market – will surpass the entire sector by 2030.

Broadcom’s October earnings were “decent,” Bernstein analyst Stacy Rasgon wrote in a note to investors early Friday. Quarterly adjusted earnings per share of $1.42 were slightly above analysts’ forecast of $1.39, and revenue of $14.1 billion was in line with expectations.

“Hock could look good in a leather jacket,” Rasgon joked, referencing Nvidia CEO Jensen Huang’s now-famous black leather jacket. Rasgon raised his price target on the stock to $250 from $195 and maintained his outperform rating.

Meanwhile, Raymond James analyst Srini Pajjuri said he is “hesitant to pursue the stock at current levels” as it trades at 33 times its fiscal 2025 price-to-earnings ratio. Pajjuri maintained its Market Perform rating.

Laura Bratton is a reporter for Yahoo Finance. Follow her on X @LauraBratton5.

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