Broadcom's recent optimistic forecast about the potential of AI over the next three years has sparked a strong reaction in the market.

On Friday, $Broadcom (AVGO.US)$ the stock price recorded a historic single-day increase, rising over 24%. Meanwhile, $PHLX Semiconductor Index (.SOX.US)$ also rose by 3.36%.

However, the stock prices of NVIDIA and Advanced Micro Devices both fell, making them the two largest laggards in the semiconductor index. $NVIDIA (NVDA.US)$ The stock price fell by 2.25%, $Advanced Micro Devices (AMD.US)$ fell by 2.83%.

Mizuho Analyst Jordan Klein pointed out that Wall Street is paying attention to the demand for ASICs (Application-Specific Integrated Circuits) from large technology companies, which could be one of the reasons for NVIDIA's stock decline:

In my view, custom chips will quickly gain market share from GPUs every year, although GPUs will dominate for training purposes.

The rise of ASICs challenges the dominance of GPUs.

Broadcom previously predicted that, based on its current large-scale customer base, the potential market for the fiscal year 2027 will reach 60 billion to 90 billion dollars.

Klein noted that Wall Street is paying attention to the demand for ASICs (Application-Specific Integrated Circuits) from large technology companies, which may be one of the reasons for the decline in NVIDIA's stocks.

He stated that in the coming years, custom chips will gradually capture market share from expensive GPUs in applications of generative AI. Although GPUs will continue to dominate AI training, the rise of ASICs raises questions among investors about whether companies like Meta Platforms Inc. and Alphabet Inc. will shift towards ASICs.

Klein further stated that some investors may choose to sell NVIDIA stocks in the short term to strengthen their Hold Positions in Broadcom. This shift reflects market confidence in Broadcom's future growth potential.

Ben Reitzes, an analyst at Melius Research, believes that Broadcom's comments are Bullish news for all AI semiconductor and networking companies, as this indicates that large companies will continue to invest in the AI field.

Broadcom's forecast not only benefited itself but also drove the increase in other companies' Stocks. $Marvell Technology (MRVL.US)$ The stock price rose by 10.8% that day. $Arista Networks (ANET.US)$ The stock price also rose by 5.1% due to optimistic comments about AI networks.

Reitzes pointed out that Broadcom's outlook suggests that the growth pace of AI networks will outstrip that of custom silicon, further boosting Arista's market performance.

In the future, as large companies continue to increase their investments in AI, the competition between custom chips and GPUs may become even more intense.

Editor/Somer