Broadcom (AVGO 6.33%) stock rose 6.3% in Thursday's trading. Investors were sunny on the stock after a supplier of memory chips published quarterly results that point to demand remaining strong for artificial intelligence (AI) hardware. The stock is also getting a boost from bullish momentum for the broader market.
Before the market opened today, SK Hynix published its first-quarter results, and the information could be great news for Broadcom. SK Hynix is South Korea-based designer of memory chips, and it's recent Q1 report suggests strong demand in the AI hardware space.
SK Hynix reported substantial sales and earnings beats driven by strong demand for its high-bandwidth-memory (HBM) solutions. Crucially, HBM chips are used by Nvidia and other AI processor designers. Hynix's results seem to suggest that Nvidia has continued to spend heavily on HBM chips. In turn, this makes it more likely that large data center customers have continued to spend heavily on the kind of networking hardware technologies and services that Broadcom provides.
Trade war concerns have been a major source of volatility for tech valuations lately, but investors have been buying back into stocks this week on indications that the U.S. is taking an active approach to mitigating some major sources of fear and uncertainty. Even though Chinese officials said yesterday that there were currently no active trade negotiations with the U.S., comments from Trump administration officials seemingly point to a desire to get a deal done.
Meanwhile, some reports suggest that the U.S. and India are close to reaching preliminary terms on a bilateral trade agreement. Signs of de-escalation on the trade war front could continue to be a bullish catalyst for Broadcom, but investors should understand that the situation is still shifting rapidly -- and more volatility could be on the horizon.
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