Hock Tan, CEO of Broadcom (L) and former CEO of Intel, Pat Gelsinger.
Reuters | CNBC
It was a big year for silicon in Silicon Valley — but a brutal one for the company most responsible for the area’s moniker.
Intel, the 56-year-old chipmaker co-founded by industry pioneers Gordon Moore and Robert Noyce and legendary investor Arthur Rock, had its worst year since going public in 1971, losing 61% of its value.
The opposite story unfolded at Broadcom, the chip conglomerate run by CEO Hock Tan and headquartered in Palo Alto, California, about 15 miles from Intel’s Santa Clara campus.
Broadcom’s stock price soared 111% in 2024 as of Monday’s close, its best performance ever. The current company is the product of a 2015 acquisition by Avago, which went public in 2009.
The driving force behind the diverging narratives was artificial intelligence. Broadcom rode the AI train, while Intel largely missed it. The changing fortunes of the two chipmakers underscores the fleeting nature of leadership in the tech industry and how a few key decisions can result in hundreds of billions — or even trillions — of dollars in market cap shifts.
Broadcom develops custom chips for Google and other huge cloud companies. It also makes essential networking gear that large server clusters need to tie thousands of AI chips together. Within AI, Broadcom has largely been overshadowed by Nvidia, whose graphics processing units, or GPUs, power most of the large language models being developed at OpenAI, Microsoft, Google and Amazon and also enable the heftiest AI workloads.
Despite having a lower profile, Broadcom’s accelerator chips, which the company calls XPUs, have become a key piece of the AI ecosystem.
“Why it’s really shooting up is because they’re talking about AI, AI, AI, AI,” Eric Ross, chief investment strategist at Cascend, told CNBC’s “Squawk Box” earlier this month.
Intel, which for decades was the dominant U.S. chipmaker, has been mostly shut out of AI. Its server chips lag far behind Nvidia’s, and the company has also lost market share to longtime rival Advanced Micro Devices while spending heavily on new factories.
Intel’s board ousted Pat Gelsinger from the CEO role on Dec. 1, after a tumultuous four-year tenure.
“I think someone more innovative might have seen the AI wave coming,” Paul Argenti, professor of management at Dartmouth’s Tuck School of Business, said in an interview on “Squawk Box” after the announcement.
An Intel spokesperson declined to comment.
Broadcom is now worth about $1.1 trillion and is the eighth U.S. tech company to cross the trillion-dollar mark. It’s the second most valuable chip company, behind Nvidia, which has driven the AI boom to a $3.4 trillion valuation, trailing only Apple among all public companies. Nvidia’s stock price soared 178% this year, but actually did better in 2023, when it gained 239%.
Until four years ago, Intel was the world’s most valuable chipmaker, nearing a $300 billion market cap in early 2020. The company is now worth about $85 billion, just got booted off the Dow Jones Industrial Average — replaced by Nvidia — and has been in talks to sell off core parts of its business. Intel now ranks 15th in market cap among semiconductor companies globally.
‘Not meant for everybody’
Following the Avago-Broadcom merger in 2015, the combined company’s biggest business was chips for TV set-top boxes and broadband routers. Broadcom still makes Wi-Fi chips used in laptops as well as the iPhone and other smartphones.
After a failed bid to buy mobile chip giant Qualcomm in 2018, Broadcom turned its attention to software companies. The capstone of its spending spree came in 2022 with the announced acquisition of server virtualization software vendor VMware for $61 billion. Software accounted for 41% of Broadcom’s $14 billion in revenue in the most recent quarter, thanks in part to VMware.
What’s exciting Wall Street is Broadcom’s role working with cloud providers to build custom chips for AI. The company’s XPUs are generally simpler and less expensive to operate than Nvidia’s GPUs, and they’re designed to run specific AI programs efficiently.
Cloud vendors and other large internet companies are spending billions of dollars a year on Nvidia’s GPUs so they can build their own models and run AI workloads for customers. Broadcom’s success with custom chips is setting up an AI spending showdown with Nvidia, as hyperscale cloud companies look to differentiate their products and services from their rivals.
Broadcom’s chips aren’t for everyone, as only a handful of companies can afford to design and build their own custom processors.
“You have to be a Google, you have to be a Meta, you have to be a Microsoft or an Oracle to be able to use those chips,” Piper Sandler analyst Harsh Kumar told CNBC’s “Squawk on the Street” on Dec. 13, a day after Broadcom’s earnings. “These chips are not meant for everybody.”
While 2024 has been a breakout year for Broadcom — AI revenue increased 220% — the month of December has put it in record territory. The stock is up 45% for the month as of Monday’s close, 16 percentage points better than its prior best month.
On the company’s earnings call on Dec. 12, Tan told investors that Broadcom had doubled shipments of its XPUs to its three hyperscale providers. The most well known of the bunch is Google, which counts on the technology for its Tensor Processing Units, or TPUs, used to train Apple’s AI software released this year. The other two customers, according to analysts, are TikTok parent ByteDance and Meta.
Tan said that within about two years, companies could spend between $60 billion and $90 billion on XPUs.
“In 2027, we believe each of them plans to deploy 1 million XPU clusters across a single fabric,” Tan said of the three hyperscale customers.
In addition to AI chips, AI server clusters need powerful networking parts to train the most advanced models. Networking chips for AI accounted for 76% of Broadcom’s $4.5 billion of networking sales in the fourth quarter.
Broadcom said that, in total, about 40% of its $30.1 billion in 2024 semiconductor sales were related to AI, and that AI revenue would increase 65% in the first quarter to $3.8 billion.
“The degree of success amongst the hyperscalers in their initiatives here is clearly an area up for debate,” Cantor analyst C.J. Muse, who recommends buying Broadcom shares, wrote in a report on Dec. 18. “But any way you slice it, the focus here will continue to be a meaningful boon for those levered to custom silicon.”
Intel’s very bad year
Prior to 2024, Intel’s worst year on the market was 1974, when the stock sank 57%.
The seeds for the company’s latest stumbles were planted years ago, as Intel missed out on mobile chips to Qualcomm, ARM and Apple.
Rival AMD started taking market share in the critical PC and server CPU markets thanks to its productive manufacturing relationship with Taiwan Semiconductor Manufacturing Company. Intel’s manufacturing process has been a notch behind for years, leading to slower and less power-efficient central processing units, or CPUs.
But Intel’s most costly whiff is in AI — and it’s a big reason Gelsinger was removed.
Nvidia’s GPUs, originally created for video games, have become the critical hardware in the development of power-hungry AI models. Intel’s CPU, formerly the most important and expensive part in a server, has become an afterthought in an AI server. The GPUs Nvidia will ship in 2025 don’t even need an Intel CPU — many of them are paired to an Nvidia-designed ARM-based chip.
As Nvidia has reported revenue growth of at least 94% for the past six quarters, Intel has been forced into downsizing mode. Sales have declined in nine of the past 11 periods. Intel announced in August that it was cutting 15,000 jobs, or about 15% of its workforce.
“We are working to create a leaner, simpler, more agile Intel,” board Chair Frank Yeary said in a Dec. 2 press release announcing Gelsinger’s departure.
A big problem for Intel is that it lacks a comprehensive AI strategy. It’s touted the AI capabilities on its laptop chips to investors, and released an Nvidia competitor called Gaudi 3. But neither the company’s AI PC initiative nor its Gaudi chips have gained much traction in the market. Intel’s Gaudi 3 sales missed the company’s own $500 million target for this year.
Late next year, Intel will release a new AI chip that it codenamed Falcon Shores. It won’t be built on Gaudi 3 architecture, and will instead be a GPU.
“Is it going to be wonderful? No, but it is a good first step in getting the platform done,” Intel interim co-CEO Michelle Holthaus said at a financial conference held by Barclays on Dec. 12.
Holthaus and fellow interim co-CEO David Zinsner have vowed to focus on Intel’s products, leaving the fate of Intel’s costly foundry division unclear.
Before he left, Gelsinger championed a strategy that involved Intel both finding its footing in the semiconductor market and manufacturing chips to compete with TSMC. In June, at a conference in Taipei, Gelsinger told CNBC that when its factories get up and running, Intel wanted to build “everybody’s AI chips,” and give companies such as Nvidia and Broadcom an alternative to TSMC.
Intel said in September that it plans to turn its foundry business into an independent unit with its own board and the potential to raise outside capital. But for now, Intel’s primary client is Intel. The company said it didn’t expect meaningful sales from external customers until 2027.
At the Barclays event this month, Zinsner said the separate board for the foundry business is “getting stood up today.” More broadly, he indicated that the company is looking to remove complexity and associated costs wherever possible.
“We are going to constantly be scrutinizing where we’re spending money, making sure that we’re getting the appropriate return,” Zinsner said.
Facebook and Instagram icons are seen displayed on an iPhone.
Jakub Porzycki | Nurphoto | Getty Images
Meta on Wednesday introduced new safety features for teen users, including enhanced direct messaging protections to prevent “exploitative content.”
Teens will now see more information about who they’re chatting with, like when the Instagram account was created and other safety tips, to spot potential scammers. Teens will also be able to block and report accounts in a single action.
“In June alone, they blocked accounts 1 million times and reported another 1 million after seeing a Safety Notice,” the company said in a release.
This policy is part of a broader push by Meta to protect teens and children on its platforms, following mounting scrutiny from policymakers who accused the company of failing to shield young users from sexual exploitation.
Meta said it removed nearly 135,000 Instagram accounts earlier this year that were sexualizing children on the platform. The removed accounts were found to be leaving sexualized comments or requesting sexual images from adult-managed accounts featuring children.
The takedown also included 500,000 Instagram and Facebook accounts that were linked to the original profiles.
Read more CNBC tech news
Meta is now automatically placing teen and child-representing accounts into the strictest message and comment settings, which filter out offensive messages and limit contact from unknown accounts.
Users have to be at least 13 to use Instagram, but adults can run accounts representing children who are younger as long as the account bio is clear that the adult manages the account.
The platform was recently accused by several state attorneys general of implementing addictive features across its family of apps that have detrimental effects on children’s mental health.
Meta announced last week it removed about 10 million profiles for impersonating large content producers through the first half of 2025 as part of an effort by the company to combat “spammy content.”
Congress has renewed efforts to regulate social media platforms to focus on child safety. The Kids Online Safety Act was reintroduced to Congress in May after stalling in 2024.
The measure would require social media platforms to have a “duty of care” to prevent their products from harming children.
Snapchat was sued by New Mexico in September, alleging the app was creating an environment where “predators can easily target children through sextortion schemes.”
A series of iPhone 16s on display inside the Apple store at Tun Razak Exchange in Kuala Lumpur, Malaysia, on Sept. 20, 2024.
Annice Lyn | Getty Images News | Getty Images
Britain’s competition regulators on Wednesday took aim at the mobile ecosystems of Apple and Google, pushing the two companies to make changes to areas like their app stores.
On Wednesday, the Competition and Markets Authority proposed designating the U.S. tech giants as having a “strategic market status” or SMS, after opening an investigation into the matter in January.
This designation is given to a large company that has “substantial and entrenched market power” and a “position of strategic significance” with respect to a digital activity in the U.K.
The CMA can force firms that are branded as having SMS to change or stop specific behaviors or practices in order to address competition concerns.
Apple and Google both took issue with the CMA’s proposals, effectively saying they would be bad for user security and consumers overall.
What has the CMA taken issue with?
Britain’s regulator focused on investigating Apple and Google’s mobile operating systems, app store and browser. One aspect of the investigation looked at whether there are barriers that may prevent other competitors from offering rival products and services on the U.S. tech giants’ mobile platforms.
Another part of the probe examined whether Apple and Google are using their position in operating systems, app distribution or browsers to favor its own apps and services.
And the final aspect of the investigation studied whether Apple and Google require developers to sign up to “unfair terms and conditions” in order to distribute their apps via the respective app stores.
The CMA on Wednesday said consumers and businesses have raised concerns about different issues across the two companies’ mobile ecosystems. But some of these include “inconsistent and unpredictable app review processes” and “inconsistent app store search rankings” that may favor the tech giants’ own apps.
The British regulator also took aim at the up to 30% commission charged by the firms on some in-app purchases and restrictions on developers telling customers about cheaper ways to pay or to subscribe outside of the app.
As part of Google and Apple’s review process to allow apps on to their app stores, developers raised concerns that the tech companies could have access to commercially sensitive data of their competitors, the CMA said.
Google’s Android operating system commands just over 61% market share in the U.K., while Apple’s iOS has just over a 38%, according to Kantar data. Google runs the Google Play store and Chrome browser, and Apple has its App Store and Safari browser.
What changes does the CMA want?
The CMA has laid out immediate changes that it wants to see, alongside some longer-term steps. The regulator said that it wants Apple to review apps for distribution in a “fair, objective and transparent manner.” This could include remedies such as Apple explaining delays or rejections and creating an avenue for businesses to raise concerns about the process.
Apple could also be made to publish a methodology for how it ranks apps in the App Store. The CMA has laid out similar remedies for Google.
The regulator is looking at how Apple and Google can make it easy for users to be steered by developers outside of an app to pay for services and products, thus avoiding their respective in-app purchase fee.
The CMA is also looking into ways to make it easier for users to transfer data between Apple’s iOS and Google’s Android to make switching easier.
For next year, the CMA said it is still looking at whether to require Apple to allow alternative app stores in iOS and the company’s iPad software. The regulator also said it is exploring whether to force Apple to allow users to download apps directly from a developer’s own website, a practice known as “sideloading.”
Apple and Google react
Apple said in a statement that the proposals from the U.K. “would undermine the privacy and security protections that our users have come to expect, hamper our ability to innovate, and force us to give away our technology for free to foreign competitors,”
“We will continue to engage with the regulator to make sure they fully understand these risks.”
Google’s Senior Director of Competition Oliver Bethell noted that both the Google Chrome browser and Android’s operating system are built on open-source code.
“These offerings enable great choice, security and innovation for users. That’s why today’s announcement is both disappointing and unwarranted,” Bethell said.
The Google executive highlighted ways in which Android has helped British developers and the economy.
“It is therefore crucial that any new regulation is evidence-based, proportionate and does not become a roadblock to growth in the U.K We remain committed to constructive engagement with the CMA for the duration of this process,” Bethell said.
U.S. tech giants face European scrutiny
Apple and Google’s regulatory problems on the continent of Europe continue to deepen.
Apple has been forced to make a number of changes to the way it operates in the EU this year. These include allowing developers to tell their users about cheaper alternatives and bypass Apple’s in-app payment system.
Apple has long argued that forced regulator-led changes to its operations could lead to privacy and security issues for users and confusing business terms for developers
In March, Google parent Alphabet meanwhile was accused by the EU of failing to comply with the DMA. The European Commission, the EU’s executive arm, said Google is treating its own search services more favorably than those of rivals. The Commission added that Google’s app store is preventing developers from steering consumer to other channels for better offers.
The search giant is also looking to fight a 4.1 billion euro fine that has stemmed from an antitrust case dating back to 2018.
The Texas Instruments headquarters in Dallas, Texas, on Jan. 21, 2024.
N. Johnson | Bloomberg | Getty Images
Texas Instrumentsreported second-quarter results on Tuesday that beat analysts’ expectations for revenue and earnings. But the stock fell in extended trading due to a third-quarter forecast that missed estimates.
Here’s how the chipmaker did versus LSEG consensus estimates:
Earnings per share: $1.41 vs. $1.35 expected
Revenue: $4.45 billion vs. $4.36 billion expected
Texas Instruments said it expects current-quarter earnings between $1.36 and $1.60 per share, while analysts were looking for $1.50 per share. The company forecast revenue of $4.45 billion to $4.8 billion, for a midpoint of $4.625 billion. Analysts were expecting revenue of $4.59 billion.
Revenue increased 16% in the second quarter from $3.82 billion in the same period a year earlier. Sales in the company’s analog chip business, its largest, rose 18% to $3.5 billion, surpassing the StreetAccount estimate of $3.39 billion for the segment.
Net income rose 15% to $1.3 billion, or $1.41 per share, from $1.13 billion, or $1.22 per share, a year ago.
Texas Instruments is a key supplier of legacy semiconductors for automotive and industrial uses.
As of Tuesday’s close, Texas Instruments shares were up 15% for the year on broader market optimism for chips. In June, the company said it would spend $60 billion to expand chipmaking factories in Texas and Utah, a move that was praised by the Trump administration in its push to bring more technology manufacturing to the U.S.