Broadcom has warned that intensifying competition in the fast-growing artificial-intelligence chip market could weigh on its expansion, sending shares of the semiconductor company down more than 3% in extended trading on Wednesday.
The Palo Alto, California-based chipmaker forecast fourth-quarter revenue of about $34.8 billion, falling slightly short of analysts' average expectation of $35.03 billion, according to data compiled by LSEG.
The weaker-than-expected revenue outlook has raised concerns among investors that Broadcom could face increasing difficulty converting the explosive demand for AI infrastructure into sustained gains, particularly as major technology companies deepen relationships with competing custom-chip suppliers.
Despite the cautious outlook, Broadcom's AI business continues to show significant momentum. The company expects AI chip sales of $21.7 billion in the fourth quarter, slightly ahead of analysts' estimate of $21.33 billion, according to Visible Alpha.
Broadcom Chief Financial Officer Amie Thuener said the company expects to maintain an adjusted operating margin of 66% in the fourth quarter, unchanged from the same period a year earlier.
The revenue forecast nevertheless highlights the competitive pressures confronting Broadcom as it seeks to strengthen its position in a market dominated by Nvidia. Nvidia's graphics processing units remain the industry standard for many AI workloads, giving the company a commanding position as technology firms race to build increasingly powerful AI systems.
Broadcom, meanwhile, has established a major role in the development of custom AI processors, which are designed for specific tasks and can provide technology companies with alternatives to Nvidia's widely used GPUs.
That market, however, is becoming increasingly contested.
Broadcom's customers are signing agreements with rival chipmakers, raising questions about how much of the expanding demand for custom AI processors the company will be able to capture.
Last month, Marvell announced a custom-chip agreement with Google that could make the search giant one of its largest investors through a potential stake worth as much as $12.2 billion. The development underscored the growing competition among semiconductor companies seeking to supply the world's biggest technology firms with specialized AI hardware.
Broadcom has also sought to secure its own long-term relationships with major customers. In April, the company signed an agreement to supply Google with future generations of custom AI chips through 2031, reinforcing its position as an important supplier to one of the world's largest AI infrastructure operators.
The rapid expansion of AI demand has also placed pressure on the semiconductor supply chain.
Broadcom has been working to reduce its dependence on individual manufacturers as demand for its products grows. In July, the company signed a multi-year memorandum of understanding with Samsung Electronics valued at more than $200 billion, aimed at strengthening its supply arrangements.
The move reflects a broader challenge facing chipmakers: meeting rapidly rising demand while securing enough manufacturing capacity and avoiding excessive dependence on a single supplier.
Broadcom's most recent quarterly results nevertheless demonstrated the strength of its AI business.
AI chip sales more than tripled to $16.7 billion in the third quarter, helping push total company revenue to $29.59 billion. That figure surpassed analysts' estimate of $29.36 billion.
Adjusted profit also exceeded expectations, coming in at $3.32 per share compared with the $3.24 analysts had projected.
The strong quarterly performance illustrates the scale of the opportunity Broadcom sees in AI, even as investors focus increasingly on the company's ability to maintain that growth in a market where competition is intensifying.
Broadcom shares have gained about 6% so far this year, but that performance has lagged both major rivals and the broader semiconductor index. The latest decline in after-hours trading suggests investors remain cautious about whether the company's custom-chip business can continue expanding rapidly enough to justify its valuation.
For Broadcom, the challenge now is balancing extraordinary demand for AI infrastructure with growing competition, manufacturing constraints and increasingly sophisticated customers seeking alternatives in the race to build the next generation of artificial-intelligence systems.