Broadcom can 'rotate back' over the next few quarters: Expert

well shares of broadcom have paired some of their losses still under pressure though after its lackluster sales forecast for the fourth quarter overshadowing its earnings beat you can see it's down over 5 a half% right now now the Apple supplier is benefiting from a surge in AI spend but its other divisions are falling short for a deeper dive into the results we are joined by Daniel Newman Chief Executive Officer of the futur room group Daniel it's great to have you on appreciate you making the time for us so I specifically want to focus in on their AI re Vue coming in at 12 billion uh they raised that AI Revenue guidance and The Business of course growing is that going to be enough to sustain broadcom moving forward it seems like the street doesn't think so yeah clearly the street wasn't happy they were looking for some sort of outsize number maybe 13 plus you know the whisper number the same thing happened with Nvidia came up with a pretty significant guidance upside um but this is a little more of a story about the diversification of the business as well so the AI business is performing you're going to have some complicated networking that broadcom's going to help solve and of course these accelerators these AI processors broadcom's in the driver's seat they have won some really important designs we know or we we speculate about Google and of course bite dance we heard about open AI but at the same time it's kind of like these three or four other parts of the business so you've got their sort of core connectivity and networking business that was a little bit off clearly investors weren't happy to see that but that's off Market wide that's a macro issue and then of course you know the VMware acquisition was a big one but that part of the business performed really really well so when you kind of look at what's happening here I think it's a company that was priced well people thought AI was going to maybe have this explosive beat and the core business has slowed a little bit but has some favorable conditions to rotate back over these next few quarters yeah you mentioned VMware they they talked about in hawan the CEO talked about VMware bookings continuing to accelerate here what type of net contribution to earnings over time are you modeling out for what VMware will bring to uh broadcom here yeah we think that the VMware acquisition has a really strong play I mean Hawk tan came out at the recent VMware explor and really he wasn't going to compete so much directly with the the normal competition you know the Red Hats or some of the other virtualization softwares that were so familiar he really Came Out Swinging and saying look we're going to compete with the public Cloud we believe that we can bring dollars back into Enterprises give them public Cloud platforms and help their businesses scale now so far despite you know some of the you know the way that Hawk maybe is characterized in the market for how he runs his businesses the software businesses whether that's been CA uh brocade now VMware they perform well he right sizes the businesses he grows them and I mean that 60 plus perc eida contribution that he makes across the business is really um you know it's really important to the overall business having said that um it's going to take some time and we need to see some proof points that this new private Cloud solution this new AI solution is going to land I'm optimistic but like I told Hawk when I spoke to him last week we need to see it in the numbers well that's fascinating by the way but I'm also curious about this idea that I've heard from some investors that they want to see broadcom taking on an additional hypers Skiller that they're going to make a chip for I mean right now about 18% of their revenue is coming directly from Apple in your conversations with hawan did you get any indication of a path forward for another hyperscaler to come on board of course we are hearing about some of the you know opportunities that exist out there we know there's only really a couple of companies playing in this particular space there's broadcom and of course marll they are very tight lipped you know they've certainly made indications that there is more opportunity out there this 12 billion number has a lot of that xpu in it and our model our forecast for the chips Market is showing that this accelerator Market is going to outpace the GPU Market by somewhere between 15 and 20% over the next five years and so we know that whether it's it's the Microsoft and and Amazon and of course the Google tpus we heard about Dance open Ai and then that's going to drive Apple so across the board we know that these AI accelerators are going to go big and there's this whole compete situation going on with Nvidia you know no one really wants to talk about it yet everyone wants to talk about it is there a doj probe what's going on but that competitive landscape broadcom plus an AMD plus an Intel gouty plus a hyperscaler accelerator does offer the most complete opportunity for something that could compete with Nvidia so it's a compelling story they're not going to leak this per se but all indications are this accelerator Market's going to grow really quickly uh just while we have you as well here Dan one of the other stories that we're tracking the Biden Administration rolled out some fresh export controls on quantum computers as China continues to make advances in the global chip industry I mean it's not even just the us at this point you've got Japan also making some sweeping adjustments there I mean my goodness the Netherlands too don't upset the Dutch on this matter but what does this mean when you have so many different countries and this latest uh effort from the US to really try and curb or at least protect even more intellectual property what does that signal to you yeah brother you know it's interesting I shared this morning some rumors out that in China renting an a100 or an h100 actually cost less than in the US which is the indicator to me and we always talk about this that China is getting enough Supply even though they're not supposed to be so these controls are they're really complicated very nuanced whether or not they work well and and how effective they are having said that the the conductor supply chain is really complex and you mentioned the Dutch Japan there's you know so many different parts and by each one of these parts not being able to support China's needs it creates more difficulty for China to really get to those most advanced nodes the world of course wants to make sure that it maintains a Global Leadership position in semis as we move into three and two and these these newest uh nodes from tsmc and from other you know Foundry providers they want China to be behind for a few years I always say Brad don't rule them out but the global supply chain of semiconductors and all of the policy makers are certainly going to make it very hard I expect China to fight hard against it um but I don't expect this to slow down these these policy makers and some of these export controls Daniel Newman thanks so much for joining us this morning on all things chips we appreciate it Daniel is the chief executive officer over at the futurum group