Broadcom Inc. has seen a significant surge in its stock prices, rising 11.1% on Monday, making it the top performer in the S&P 500 for the day. This remarkable rally can be attributed to investors returning to high-tech companies associated with the booming artificial intelligence sector. The company’s shares have soared 60% year-to-date, and Monday marks its most substantial single-day gain since April 9. Broadcom also led the Technology Select Sector SPDR fund, which measures the performance of the technology sector within the S&P 500.
This positive momentum for Broadcom coincides with a robust rebound in shares of Alphabet Inc., the parent company of Google, which saw a more than 5% increase as the AI trade regained some of its lost steam. The synergistic relationship between the two companies is noteworthy, particularly in the realm of application-specific integrated circuits (ASICs). Broadcom supplies these high-performance chips to hyperscalers, with Google being a major customer.
Broadcom plays a critical role in designing and manufacturing Google’s tensor processing units (TPUs), which are specialized AI chips integral to Google’s internal AI infrastructure. These TPUs directly compete with Nvidia’s graphics processing units (GPUs) used for similar AI applications. The collaboration between Broadcom and Google, ongoing since 2016 and now in its seventh generation, has positioned both companies well in the dynamic AI landscape.
Analysts have shown increasing optimism toward Broadcom, reflecting heightened enthusiasm about its partnership with Alphabet. Recently, Melius Research’s Ben Reitzes maintained a buy rating on Broadcom and raised his price target to $475, indicating potential gains of nearly 40% from its previous closing price. Reitzes noted that the TPU has proven to be one of the most successful ASICs in the market and highlighted the momentum it is gaining, which could significantly bolster both Broadcom’s AI revenues and Google’s Cloud Platform growth.
As Broadcom continues to innovate in the ASIC space, the potential for substantial revenue increases from partnerships with Alphabet and other tech giants seems promising, suggesting a bright future for the company in the ever-expanding AI market.