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JPM: Custom chip demand accelerating; AVGO and MRVL to dominate

Published 2024-06-04, 06:28 a/m
© Reuters.
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JPMorgan raised its outlook for the custom chip (ASIC) market, projecting a market size of $20-$30 billion and a growth rate of 20% annually, driven by the surge in generative AI.

According to analysts, this demand is fueled by cloud giants like Google and Meta, which are integrating their technology roadmaps and relying more heavily on custom-designed chips for AI workloads.

The bank highlights Broadcom (NASDAQ:AVGO) and Marvell Technology (NASDAQ:MRVL) as the leaders in this space.

Broadcom is estimated to have captured a design win for Google's next-generation TPU v7 program, solidifying their partnership "through CY26/CY27."

Analysts see several advantages to custom ASICs over off-the-shelf solutions, including "better performance, lower power consumption and lower overall silicon costs." This aligns with the cloud titans' push for "differentiation" in their AI infrastructure.

The increasing complexity of chip design is also driving a trend where cloud giants partner with specialists like Broadcom (estimated market share leader with 55-60%) and Marvell (holding the #2 spot with 13-15%). Analysts expect this trend to continue.

For Broadcom, this translates to potentially exceeding $11 billion in AI revenue this year, fueled by Google and Meta's custom ASIC programs. Marvell is also poised for growth, with its first two AI ASIC programs (for Amazon and Google) now in production. Analysts estimate Marvell to capture $1.6-$1.8 billion in AI revenue this year, growing to $2.8-$3 billion in 2025.

While Broadcom and Marvell are the frontrunners, analysts acknowledge other players in the custom ASIC market like Intel, AMD, and MediaTek. The report also mentions indirect beneficiaries like ARM, Synopsys, and Cadence in the Electronic Design Automation (EDA) space.

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