TikTok owner ByteDance is collaborating with Broadcom (NASDAQ:AVGO) on developing an advanced AI processor, according to an exclusive Reuters report. The report stated that ByteDance is working on a 5 nanometer (nm) AI processor with Broadcom. This chip is an application-specific integrated circuit (ASIC) that will comply with U.S. export restrictions and will be manufactured by Taiwan’s TSMC (NYSE:TSM).
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Details of ByteDance and AVGO Collaboration
This collaboration between ByteDance and Broadcom is expected to reduce procurement costs for the TikTok owner and ensure a stable supply of high-end chips. Amid rising geopolitical tensions between the U.S. and China and U.S. export controls, Chinese companies are scrambling to procure advanced AI chips.
Additionally, TSMC is not expected to start manufacturing the new chip this year. Although design work is in progress, the “tapeout” phase, marking the end of design and the start of manufacturing, has not yet begun.
Securing AI Chips Is Important for ByteDance
AI chips are crucial for ByteDance to enhance its algorithms. In addition to TikTok and its short-form video app Douyin, ByteDance operates popular apps like Doubao, a ChatGPT-like chatbot with 26 million users. According to Reuters, ByteDance has stockpiled Nvidia (NASDAQ:NVDA) chips to support its AI efforts.
Is AVGO Stock a Buy?
Analysts remain bullish about AVGO stock, with a Strong Buy consensus rating based on 22 Buys and one Hold. Over the past year, AVGO has surged by more than 100%, and the average AVGO price target of $1,886.43 implies an upside potential of 13.7% from current levels.
