Broadcom’s Meta Pact May Mean a Billion Dollars a Year, Says J.P.Morgan

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J.P.Morgan believes chip maker Broadcom will be a big beneficiary of the metaverse.

On Tuesday, analyst Harlan Sur said

Broadcom

(ticker:

AVGO

) has won several deals with

Meta Platforms’

(

FB

) metaverse unit for artificial intelligence, video processing, and networking purposes.

“We believe that Broadcom custom chip (ASIC) design win pipeline is accelerating at Meta/Facebook as it starts to execute on its metaverse hardware infrastructure architecture which will require significant  silicon compute capabilities,” he wrote.

Several large technology companies have been investing aggressively in the metaverse—the futuristic vision where consumers can some day play, socialize, and work in immersive virtual worlds. Earlier this month,

Sony

(

SONY

) said the area is rising in importance and it plans to embrace metaverse as a growth priority.

Meta has already been investing a massive amount of money to build up its capabilities. The technology company has lost more than $20 billion over the last three years on projects tied to the metaverse.

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J.P.Morgan predicts Broadcom’s revenue from Meta as a cloud-computing chip customer will reach $1 billion-plus annually over the next three to four years. Sur said the chip maker is the largest provider of high-end custom chips followed by

Marvell Technology

(MRVL).

“The custom chip (or ASIC) business for Broadcom is a strong franchise and augments its leadership in networking, broadband, storage, and wireless,” the analyst wrote.

Meta and Broadcom didn’t immediately respond to requests for comment about the J.P.Morgan report.

Last week, Broadcom announced it had reached an agreement to acquire software company

VMware

(VMW) for roughly $61 billion in cash and stock.

The company’s shares have declined by 13% this year, compared with the 22% drop for the

iShares Semiconductor

ETF (SOXX), which tracks the performance of the ICE Semiconductor Index.

Write to Tae Kim at [email protected]