AI Diffusion Ends—Broadcom’s Turn Comes Next in the Global Chip Cycle

Over approximately the last three weeks, markets have been on the rise big-time. The S&P 500 closed just under $5,900 on May 14, just around 4% lower than the all-time high it reached in February. As market sentiment shifts, Broadcom (NASDAQ:), a leading semiconductor stock, has emerged as a top beneficiary. Despite at one point being down nearly 38% in 2025, Broadcom is now just slightly in the green this year as of the May 14 close.

The announcement of the trade deal between the U.S. and China boosted the stock. Shares jumped almost 12% within two days after the announcement. However, there were other highly positive recent pieces of news for Broadcom that the trade deal may somewhat overshadow.

Most notable is that President Trump is ending the Biden-era “AI Diffusion Rule.” Its end has the potential to substantially benefit companies like Broadcom. So, what exactly was the AI Diffusion Rule, and what does its cancellation mean for Broadcom?

Understanding the End of AI Diffusion, NVIDIA and AMD See Immediate Benefit

The purpose of the AI Diffusion Rule was to give the U.S. government extensive control over which countries can and cannot get access to advanced AI chips made by American firms. Specifically, it controls chips used to train advanced AI models.

The rule categorized countries into three different tiers. Tier 1 countries included many of America’s closest allies. These countries face no restrictions. Tier 2 countries include most other countries. India, Israel, Singapore, Switzerland, Mexico, Saudi Arabia, and the United Arab Emirates (UAE) were notable inclusions.

These countries were limited in the number of chips they could buy. Tier 3 countries, which include adversaries like China and Russia, were not allowed to buy any advanced chips.

Really, the government was trying to specifically prevent China and Russia from getting these chips to slow the advancement of their AI capabilities. With the ending of AI Diffusion, that isn’t likely to change. However, how the United States treats those Tier 2 countries is changing. NVIDIA Corporation (NASDAQ:)’s announcement that it would sell 18,000 of its most advanced chips to Saudi Arabia on the same day the government eliminated the AI Diffusion rule provides evidence of this.

Advanced Micro Devices (NASDAQ:) also announced a huge AI partnership in the country.

Overall, the end of AI Diffusion means that chip companies with significant AI capabilities now have a much larger opportunity to sell their most advanced technology to these Tier 2 countries. Many of these countries are extremely wealthy, adding to the size of the opportunity. This extends to Broadcom, but in a slightly different way than NVIDIA and AMD.

The End of AI Diffusion: Broadcom Waits Its Turn to Capitalize

Broadcom’s custom chips are largely used for AI model inference, rather than primarily for AI model training. Training comes before inference. For countries like Saudi Arabia, this means they need time to train their models with NVIDIA and AMD chips. After that, Broadcom’s chips can really make a difference.

Thus, the fact that NVIDIA and AMD are striking deals opens up the door for Broadcom to sell large amounts of chips to Tier 2 countries down the line. How long that might take is hard to say, but a big opportunity now exists for Broadcom nonetheless.

The benefit to Broadcom comes even though the company hasn’t expressed concerns about AI Diffusion, at least with a specific set of customers. In the company’s last earnings call, Bernstein Research analyst Stacy Rasgon specifically asked about this.

Rasgon asked whether AI diffusion would impact Broadcom’s design wins or shipments for the three big AI customers the firm is selling to in volume.

In response, Broadcom Chief Executive Officer (CEO) Hock Tan said, “To answer your question directly, no, we don’t have any concerns.” This underscores Broadcom’s focus on inference chips, which AI Diffusion did not directly impact. However, they were indirectly impacted because training comes before inference. So, with AI Diffusion ending, the positive impact on Broadcom comes from the expansion of its serviceable market.

The End of AI Diffusion Adds Another Broadcom Tailwind

For the reasons discussed above, Broadcom can win big due to AI Diffusion ending. Its chips now have a strong path forward to getting into the hands of some of these huge Tier 2 countries. But, cashing in will likely take time.

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