How Broadcom Became a $50 Billion Company—and Why It Matters

Broadcom just announced it hit $50 billion in annual sales for 2024. That's a 40% increase from the year before—making it one of the fastest-growing giant tech companies right now. Two things drove this: explosive demand for computer chips that power artificial intelligence systems, and a big software company Broadcom bought called VMware.

Most people think of Broadcom as a chip maker. But it's become something more balanced: half semiconductor business, half software business. That matters because the two businesses work differently and grow at different speeds.

The AI Chip Boom: $10 Billion in One Year

Broadcom made $10 billion in revenue from AI-related chips alone in 2024. These aren't the graphics chips you might have heard about. Instead, Broadcom builds custom computer chips—think of them like bespoke tools designed for a specific job—that big tech companies like Google, Meta, and Microsoft use to build their own AI systems. Broadcom also makes networking chips that connect all these AI computers together inside massive data centers.

This is a different approach than selling the same chip to many customers. Instead, Broadcom partners closely with one big tech company at a time, designing chips exactly for what that company needs. Once you've invested months designing a custom chip with a company, it's expensive and disruptive to switch suppliers. That makes these partnerships sticky and predictable.

The trend here is clear: tech companies are spending enormous amounts on AI infrastructure, and Broadcom is capturing a meaningful slice of that spending.

VMware: Betting on Software, Not Breadth

Broadcom paid about $61 billion to acquire VMware in 2023. VMware makes software that helps big companies manage their computer networks and cloud systems. Now Broadcom runs VMware as part of its business, generating $20 billion in annual software revenue.

But here's where it gets interesting: Broadcom has been deliberately shrinking VMware's customer base. The software generated about $1.4 billion in customer spending per quarter as of the end of 2024. That's down 40% from before Broadcom bought it.

Why would a company deliberately make its sales smaller? Because Broadcom decided to focus only on the largest enterprise customers—the ones that spend the most and are least likely to switch suppliers. It's dropping the smaller customers that generate less profit. This is a trade-off: less total revenue, but higher profit margins and more predictable cash flow. It's a gamble that the money from big customers will matter more than the lost volume from smaller ones.

The risk here is real. Smaller companies and competitors now have room to grab customers Broadcom no longer wants. Whether that actually happens depends on how good those competitors are.

A Stock Split: A Small Signal of Big Confidence

During 2024, Broadcom split its stock. This means each share became multiple shares, but your piece of the company stayed the same size. It's a purely technical move—it doesn't change what the company is worth.

So why do it? Usually, it signals that management expects the stock price to keep climbing. A lower price per share makes it easier for regular investors to buy in, and it can make trading smoother. For a company making $50 billion a year, it's not a major strategic decision. But it does suggest the leadership team is optimistic about what's ahead.

What This Means Going Forward

Broadcom has transformed from a pure chip maker into a diversified technology company. It's now exposed to two powerful trends: the buildout of AI infrastructure (through chips), and enterprise software spending (through VMware).

The bigger question is whether Broadcom can keep growing at 40% a year. Software businesses often grow more steadily and with higher profit margins than chip businesses—but they're trickier to manage well. Broadcom already owns the assets. What matters now is whether it can run VMware well enough to keep those big enterprise customers happy and paying premium prices.

For investors looking for AI exposure, Broadcom offers something different from companies that make graphics chips. It's more tightly wired into the specific needs of tech giants building proprietary AI systems. Whether that's a better or worse bet depends on how long those tech companies keep spending at today's pace.