To The Moon

Broadcom's 10% Jump Unleashes Millions of Dollars in Bullish Option Trades

$Broadcom(AVGO)$   shares jumped 10% Monday, emboldening the bulls to pile onto millions of dollars in option trades after the company announced a partnership with OpenAI. 

Under the deal, Broadcom and OpenAI will jointly develop and deploy 10 gigawatts of custom artificial intelligence (AI) accelerators and systems that will be designed by the owner of ChatGPT, the companies said in a press release Monday. 

At 10:32:22 a.m. in New York, an active seller collected a $4.43 million premium for put options that give their holder the right to sell 100,000 Broadcom shares at $340 each by June 18 next year. That trade would be profitable for the seller should Broadcom shares continue to trade above that strike price, rendering the contract worthless by the time it expires in 248 days. That block trade is almost twice the size of the current open interest. 

Broadcom's deal with OpenAI comes amid a backdrop of what JPMorgan analysts described as a “multi-year runway of strong growth for AI-related infrastructure spending combined with positive cyclical recovery trends in the non-AI market.”

"Strong AI compute demand is also driving strong demand for high-performance networking and should continue to drive strong orders/design activity for Broadcom’s networking products (switching/routing, PCIe switching, Optical)," JPMorgan analysts including Harlan Sur wrote in a note Friday, before the company announced the OpenAI partnership. 

The JPMorgan analysts said Broadcom is on track to drive more than $20 billion in total AI revenues in 2025, and over $40 billion in 2026 as key customer AI programs begin to ramp.  

"Custom accelerators combine remarkably well with standards-based Ethernet scale-up and scale-out networking solutions to provide cost and performance optimized next-generation AI infrastructure," Charlie Kawwas, president of Broadcom’s semiconductor solutions group said. “The racks include Broadcom's end-to-end portfolio of Ethernet, PCIe and optical connectivity solutions, reaffirming our AI infrastructure portfolio leadership.”

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