Shares of Broadcom soared more than 24% on Friday, marking the company’s strongest trading day ever and elevating its market capitalization past the $1 trillion milestone for the first time. This surge followed the release of impressive fourth-quarter earnings that surpassed Wall Street’s predictions, particularly showcasing remarkable growth driven by artificial intelligence (AI) revenue.
Broadcom reported fourth-quarter revenues of $14.05 billion, representing a 51% increase year-over-year, although it fell just short of the $14.09 billion anticipated by analysts. Within its semiconductor solutions sector, which encompasses its AI chip offerings, revenue rose 12% to $8.23 billion compared to $8.03 billion from the previous year.
The company revealed that its AI revenue skyrocketed by 220% for the year, amounting to $12.2 billion. The positive sentiment around the stock began in after-hours trading on Thursday when CEO Hock Tan announced the development of custom AI chips in collaboration with major cloud clients.
Net income for Broadcom reached $4.32 billion, translating to 90 cents per share, a 23% increase from $3.52 billion, or 83 cents per share, for the same quarter last year.
Analysts from Bernstein noted that while there were concerns prior to the earnings release, they found Broadcom’s results to be satisfactory and expressed optimism about the company’s strategic vision for AI. They raised their stock price target to $250 from $195.
Bank of America reiterated a buy rating, emphasizing Broadcom’s leading position in the custom chip market, though they cautioned about competition from Nvidia in the merchant silicon sector. Meanwhile, Morgan Stanley highlighted that Broadcom’s positive commentary regarding AI is likely to sustain long-term enthusiasm for the company, making it a compelling choice for investors interested in AI semiconductors in the coming years.
This remarkable performance not only underscores Broadcom’s significant strides in the AI sector but also reflects the broader growth potential within the technology industry as AI continues to transform various business landscapes.
Overall, the strong quarterly results and optimistic forecasts suggest that Broadcom is well-positioned for sustained growth, particularly in the rapidly evolving AI market, instilling confidence among investors and analysts alike.