ByteDance, the owner of TikTok, is teaming up with Broadcom to develop a sophisticated 5-nanometer AI processor that will comply with US export restrictions. The chip, which is an application-specific integrated circuit (ASIC), is being manufactured by TSMC of Taiwan. This collaboration aims to lower procurement costs for ByteDance and ensure a stable supply of high-end chips, especially in the midst of increasing tensions between the US and China.
While the design work for the new chip is ongoing, the manufacturing process has not yet started, and TSMC is not expected to begin production this year. The development of AI chips is crucial for ByteDance to enhance its algorithms, supporting various apps such as TikTok, Douyin, and Doubao with millions of users. Given the importance of these chips, ByteDances’s partnership with Broadcom and reliance on Nvidia chips underscores the significance of advanced technology in their operations.
Investors are upbeat on Broadcom, with analysts recommending a Strong Buy rating based on 22 Buys and one Hold. The stock has surged over 100% in the past year, with an average target price of $1,886.43 suggesting a potential upside of 13.7% from its current level. As ByteDance continues to invest in cutting-edge technology like AI processors, its collaboration with Broadcom and focus on advanced chips could pave the way for further innovation and growth in the future.
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