Boom, Thanks to the AI Loop: Broadcom, HPQ Silicon, and GitLab

It will not work without Broadcom

Currently, giants like Nvidia and Micron Technologies are the main focus of investor interest. Nevertheless, several companies are benefiting from the boom, including Broadcom. Broadcom is not a traditional chip manufacturer; rather, it specializes in so-called network and custom chips (ASICs). Here is the issue: When data centers interconnect thousands of Nvidia GPUs, a bottleneck arises in data transmission. Broadcom supplies the high-speed switches that allow these massive amounts of data to flow without errors. The company also develops custom AI processors for tech giants like Google and Meta.

In June, the Nasdaq-listed company reported its results for the second quarter of fiscal year 2026, ending May 3. And the results show that Broadcom is one of the largest beneficiaries of the AI infrastructure boom. Revenue rose 48% to USD 22.19 billion, and earnings per share reached USD 2.44. Both figures exceeded market consensus. Notably, the operating profit margin reached an impressive 67.3%. With free cash flow of USD 10.26 billion, the company is extremely well-positioned. CEO Hock Tan emphasized during the earnings call that the company will continue to focus on custom AI chips rather than general-purpose GPUs. The company has firm supply agreements with Meta, Anthropic, and OpenAI.

For the full year 2026, Broadcom now expects USD 56 billion in revenue from AI semiconductors alone (+180% year-over-year); next year, the company is projected to surpass USD 100 billion in revenue from the AI chip segment alone. The board has approved a quarterly dividend of USD 0.65 per share. In addition, a new USD 10 billion share buyback program was approved, which will run through the end of the year. The problem is that the share is racing from one record high to the next and is extremely highly valued. It is currently trading about 10% below its all-time high. Anyone speculating here is betting on a boom in AI data centers that will not end anytime soon.

HPQ Silicon: Partner of a German Chemical Giant

There are many little helpers in everyday life that make our lives better. Pyrogenic silica is definitely one of them. It is an extremely fine, white powder consisting of microscopic silicon dioxide particles. What is remarkable about it is its enormous specific surface area and its structure. As a result, it acts like an invisible three-dimensional network in liquids and materials. That is why it is used in so many products today. As a so-called rheological additive, it ensures that paints, varnishes, or adhesives remain viscous at rest and do not drip. Under pressure, however, such as when being brushed or sprayed, they easily become fluid. Silica also improves the tear resistance of silicone rubber and is therefore used in automotive seals and hoses, as well as in implants and food storage containers. In the pharmaceutical industry, it is necessary to keep powders free-flowing. And the material is now increasingly used in modern lithium-ion and gel batteries.

However, this jack-of-all-trades has a major drawback in the production process. The conventional process is extremely complex, energy-intensive, expensive, and harmful to the environment. HPQ Silicon has developed a process that requires few chemical intermediate steps. HPQ's so-called FSR reactor, developed in collaboration with PyroGenesis, converts quartz directly into pyrogenic silica in a single, chemical-free plasma step. This not only reduces production costs but also significantly lowers CO₂ emissions throughout the entire production process. HPQ Silicon's partnerships to date demonstrate that the process is not merely a laboratory fantasy. The Canadian company has already signed a letter of intent (LOI) with the German firm Evonik. Evonik is a global market leader in fumed silica, marketed under the AEROSIL brand. As part of this partnership, material from HPQ's pilot plant will be scaled up and tested to ensure the cost-effective, low-carbon production process precisely meets Evonik's industry standards. First-generation samples have already been successfully validated by Evonik.

With its process, HPQ Silicon could break into a billion-dollar market. In addition, the technology company has two more aces up its sleeve. In the field of silicon battery materials, HPQ is collaborating with the French company Novacium SAS to develop silicon-based anode materials for lithium-ion batteries. These materials achieve a significantly higher energy density than conventional graphite, prevent the typical swelling of silicon, and can be integrated directly into existing production lines, resulting in substantial cost savings. HPQ is targeting high-margin niche markets such as defence, aviation, and the drone sector. If everything goes according to plan, HPQ would be the only non-Chinese manufacturer. Last but not least, HPQ has developed a system to generate hydrogen directly on-site as needed. HPQ's hydrogen fuel cells can, for example, extend drone flight times.

HPQ Silicon is thus active in three exciting technology sectors at once. In the coming 18 to 24 months, even a single breakthrough could be enough to take the company to a new level. Its market capitalization of approximately CAD 75 million does not yet reflect the company's potential. Bold investors are using the recent correction as an opportunity to buy in.

CEO Bernad J. Tourillion presented HPQ Silicon's business model and strategy at the most recent IIF.

https://www.youtube.com/watch?v=V6FO2uPdQLI

Why GitLab Is the Winner of the AI Cycle

Even in the AI sector, the market has not hyped up all stocks yet. GitLab is one of them. The technology, originally developed as an open-source project by Ukrainian Dmytro Saporoschez, now offers one of the world's leading platforms for software development. GitLab benefits directly from the fact that AI models are increasingly writing software autonomously. Because as AI generates more and more code, the problem shifts. Writing code becomes cheap, but testing, securing, and deploying it becomes the bottleneck. This is exactly where GitLab comes in. Its software manages code, checks for security vulnerabilities, and deploys it to servers. Revenue is generated primarily through per-developer licenses and additional subscriptions for AI features.

And this is also reflected in the first-quarter figures, which clearly exceeded analysts' expectations. GitLab's revenue rose by 23% year-over-year to USD 264.2 million. Earnings per share reached USD 0.23. Notably, existing customers are significantly expanding their contracts and licenses. The so-called net retention rate reached 117%. In addition, the company generated a strong free cash flow of USD 146.7 million. CEO Bill Staples emphasized during the announcement that GitLab's central AI interface, DAP, has gotten off to a phenomenal start. The platform noticeably reduces the workload for developers; GitLab reports an average time savings of 1.5 hours per task at a major US bank participating in the pilot project. GitLab's share price has roughly halved since its high at the beginning of the year. There is no sign of hype here. With a market capitalization of just USD 4.9 billion, GitLab may also be a takeover target for a major SaaS company.

Broadcom is a major beneficiary of the AI revolution. However, the stock has run quite hot. HPQ is entering the race with three new technologies aimed at replacing traditional methods. The stock is undervalued and is likely to see a revaluation if these efforts succeed. GitLab is the go-to tool for every AI developer in every company. The stock's 50% decline since the start of the year presents opportunities.