Broadcom Poised for $150 Billion AI Revenue Opportunity, Analysts Bullish

Broadcom sees a $150B+ opportunity for cumulative AI revenues over the next 5 years By Investing.com

In a note Tuesday, investment bank JPMorgan said that in a recent investor group meeting they hosted, Broadcom's (NASDAQ:AVGO) management highlighted significant growth opportunities in AI and its core semiconductor business. Key executives, including President and CEO Hock Tan, President of Semiconductor Solutions Group Charlie Kawwas, and head of IR Ji Yoo, provided insights into the company's outlook. Analysts at JPMorgan noted several important takeaways from the meeting. They said Broadcom continues to see strong year-over-year booking trends for its non-AI semiconductor business, which have persisted into the July quarter. This is complemented by sustained AI order momentum, suggesting robust demand across the board. According to the bank, one of the most compelling points from the discussion was Broadcom's projection of a $150 billion opportunity in cumulative AI silicon revenue over the next five years. This figure is based on anticipated revenue of over $30 billion per AI customer, implying a 30-40% annual growth rate in AI semiconductor revenues during this period. Broadcom's established position as a major player in the AI ASIC market and its strong technological capabilities are expected to enhance customer retention, especially as chip complexities increase. Furthermore, JPMorgan says Broadcom's Ethernet networking solutions are gaining significant traction, with seven of the eight largest global AI clusters currently utilizing Broadcom Ethernet. Analysts add that by next year, all eight of the largest AI clusters will be powered by Broadcom Ethernet. The adoption of co-packaged optics is also said to be approaching a critical juncture, which should further bolster their networking business. Additionally, the expansion of enterprise AI is expected to drive customer conversion to VMware's full solution stack, presenting a multi-year revenue growth opportunity for Broadcom. Overall, JPMorgan reiterated its Overweight rating on Broadcom, citing accelerating AI fundamentals and improving non-AI semiconductor business as key drivers of strong earnings growth.

Broadcom Has Over $150B Of AI Silicon Opportunity Over Next 5 Years, Says Analyst - Broadcom (NASDAQ:AVGO)

Dual strength in AI and non-AI segments positions Broadcom for robust growth. Broadcom Inc. AVGO is setting its sights on a massive artificial intelligence (AI) silicon market opportunity, worth over $150 billion in the next five years. This forecast by JPMorgan analyst Harlan Sur, positions the tech giant for significant growth. Broadcom's business is poised for both near-term and long-term success, says Sur. "The strong Y/Y booking trends that the team saw in Apr-Qtr for their non-AI semi business continues to persist into the Jul-Qtr on top of sustained AI order momentum," notes Sur. This dual strength in both AI and non-AI segments is a testament to Broadcom's strategic positioning and resilience. Read Also: Amazon, Broadcom And 2 Other Stocks Insiders Are Selling Broadcom's AI Goldmine Broadcom's AI infrastructure build-out is a key driver of its growth prospects. The company sees a cumulative AI silicon revenue opportunity of over $150 billion across four to five major AI customers in the next five years. This implies a 30-40% annual growth rate in AI semiconductor revenues. Sur highlights, "AI infrastructure build-out remains strong and the team sees $30B+ per AI customer of cumulative AI silicon revenue opportunity (4-5 customers) over the next 5 years." Broadcom's AI ASIC Market Leadership Broadcom's incumbency in the AI ASIC market, backed by strong technology capabilities and customer relationships, gives it a competitive edge. Sur points out, "Incumbency is a big competitive advantage for Broadcom in its AI ASIC business and its strong technology capabilities/expertise/IP should drive increasing customer stickiness on higher chip complexities." The company's expertise in Ethernet networking, powering seven of the eight largest global AI clusters, further cements its leadership in the sector. Broad Recovery In Broadcom's Cyclical, Non-AI Segments Beyond AI, Broadcom is witnessing a broad recovery in its cyclical semiconductor businesses. The company's non-AI segments, including server storage and enterprise networking, are showing strong signs of improvement. "The positive booking trends that the team saw in Apr-Qtr (up 30% Y/Y in non-AI semi bookings) continues to persist into the July-Qtr.," Sur observes. This recovery is expected to drive higher semiconductor margins and earnings. Broadcom's $150B AI Silicon Opportunity Broadcom's strategic initiatives and market positioning make it a formidable player in the tech landscape. With an anticipated "$150 billion AI silicon opportunity" and a recovering semiconductor market, Broadcom is well-positioned for sustained growth. As Sur concludes, "We see accelerating AI fundamentals combined with improving fundamentals in non-AI semiconductor business driving strong earnings revenue/earnings growth." Read Also: 5 Semiconductor Stocks Set For Explosive Growth In Second Half 2024, Says JPMorgan: Nvidia Not Included Image: Shutterstock Market News and Data brought to you by Benzinga APIs

Bank of America calls this chip stock its top AI pick with 'no signs of demand slowing down'

Bank of America thinks Broadcom can continue to cash in on the artificial intelligence boom, with the company showing "no signs of slowing down." Analyst Vivek Arya reiterated a buy rating on the chipmaker in a Monday note and maintained a $215 per share price target. BofA's forecast implies more than 25% upside from Monday's $171.42 close. Broadcom stock has advanced nearly 54% in 2024, as the company emerged as one of the key beneficiaries of the rise of AI outside of Nvidia . The strong demand it's seeing was evident in its better-than-expected second-quarter results . A 10-for-1 stock split it recently announced took effect on Monday. AVGO YTD mountain Broadcom stock. Arya said Broadcom is BofA's top AI pick thanks to the company's "multiple vectors of growth." Following a conversation with Broadcom CEO Hock Tan, Arya said he expects AI to grow into a $30 billion to $50 billion opportunity over the next three to five years. The market, which should contribute $11 billion in sales in fiscal 2024, will encompass networking, interconnects and accelerator segments, he said. Tan described Broadcom's customers as being split between public cloud vendors and consumer-facing AI platforms like Meta and Google-parent Alphabet. The mix of this customer base will help stoke and maintain future demand, Arya noted. "AVGO sees these large consumer AI customers to continue investing and reach 1mn+ xPU [excluding processing unit] clusters over the next 3-5 years (from 100k this year), with no signs of demand slowing during this period," the analyst said. Further, the analyst said Broadcom is the "best and most consistent generator of cash at 45-50%+ of sales." The company's management plans to use half of its free cash flow to pay dividends, with the rest going to pay down debt.