Broadcom has experienced notable volatility in its stock this year, consistently reflecting trends typical of many large AI-related companies. However, the company’s custom chip solutions tailored for artificial intelligence appear to be gaining momentum in the market. A Wall Street analyst predicts a much larger market potential for Broadcom, indicating that the future looks bright for the company.
At the end of last year, Broadcom’s market capitalization soared to join the elite $1 trillion club alongside industry giants such as Nvidia, Tesla, Apple, and Berkshire Hathaway. However, following significant market fluctuations, particularly a sell-off in April sparked by global trade tensions, Broadcom’s valuation slipped below the $700 billion mark. Recently, a resurgence in its stock has enabled Broadcom to reclaim its position in the trillion-dollar club as of late May.
Analyst Ben Reitzes from Melius Research views Broadcom’s custom chips as complementary to Nvidia’s offerings — rather than competitive. The company’s application-specific integrated circuit (ASIC), known as XPU, is designed specifically for certain workloads, enhancing the performance of AI tasks involving real-time data analysis. Broadcom collaborates with major players in the AI sector, including Meta Platforms and OpenAI, to advance its custom chip technology tailored to specific AI applications.
Reitzes, in his analysis, has raised Broadcom’s price target significantly from $198 to $283 per share, signaling a potential 19.4% upside based on his estimates. His upgrade reflects an anticipated robust growth trajectory, estimating a remarkable 43% compound annual growth in revenue from AI processors over the next decade. This optimistic outlook is bolstered by Broadcom securing new clients for its custom AI chip solutions, which could further expand its market reach.
Overall, Broadcom’s evolution in the AI sector underscores its potential for substantial growth and innovation, offering hope for continued advancements in technology that could redefine industry standards.