Business is booming for AI chip designer Broadcom.
If you put a group of people in a room and ask a question, you’ll rarely get the same answer from everybody. And that holds true if you’re asking about stocks as well — particularly when you’re seeking the views of the highly trained stock analysts who provide expert analysis about publicly traded companies.
But there’s one artificial intelligence (AI) stock that breaks the mold: Wall Street’s experts are overwhelmingly positive on Broadcom (AVGO 1.02%).
Image source: Getty Images.
About Broadcom stock
Broadcom is one of the leading makers of AI chips worldwide. True, it doesn’t get as much publicity as Nvidia, which became the market leader in the data center parallel processor business with its powerful graphics processing units (GPUs). But Broadcom is charting a different course through that market, making it a compelling investment.
Broadcom designs custom chips called application-specific integrated circuits (ASICs). It works directly with its hyperscaler clients to design ASICs to be precisely suited to the workloads they are expected to handle. While this makes them less flexible than Nvidia general-purpose GPUs, it makes Broadcom’s chips more affordable to buy and more efficient to operate.
Now, here’s where it gets interesting. Broadcom has worked with Alphabet to help it create its Tensor Processing Units (TPUs), which it is using as an alternative to Nvidia’s GPUs. They have been working together since 2016 to develop TPUs that are suitable for training and running AI programs.
That partnership is going to continue. Alphabet announced that it plans to spend about $185 billion this year on capital expenditures related to AI and building out its products. A significant percentage of that money will likely be landing in Broadcom’s account. In addition, Anthropic signed a $10 billion deal last year with Broadcom for custom chips, and then followed that up in December with another $11 billion order.
Today’s Change
(-1.02%) $-3.50
Current Price
$340.44
Key Data Points
Market Cap
$1.6T
Day’s Range
$339.84 – $348.01
52wk Range
$138.10 – $414.61
Volume
50K
Avg Vol
31M
Gross Margin
64.71%
Dividend Yield
0.71%
What are analysts saying about Broadcom stock?
According to Yahoo! Finance, 50 analysts are covering Broadcom stock. Of that number, 40 have buy ratings on it, and nine others have strong buy ratings. Only one analyst has a hold rating, and none of them suggest selling. That’s as close to a unanimous verdict as you’re going to find on Wall Street.
The consensus 12-month price target among those analysts for Broadcom stock is $458, which is 38% above current levels (as of this writing). The most bullish target of $535 suggests a possible 61% jump, and even the most pessimistic target of $370 still predicts an 11% gain.
Broadcom reported revenue of $18.01 billion in its fiscal fourth quarter, up 28% from a year earlier, with net income of $8.51 billion and earnings of $1.74 per share. CEO Hock Tan said AI semiconductor revenue was up 74% year over year, and management expects its fiscal Q1 semiconductor revenue to be $8.2 billion — twice what it was a year prior.
That’s why analysts are so bullish about Broadcom stock, and why I’m expecting another solid earnings report the next time management steps up to the podium on March 4.
