By Tae Kim
Broadcom stock offers an attractive opportunity, thanks to soaring demand for artificial-intelligence semiconductors, according to J.P. Morgan.
On Tuesday, analyst Harlan Sur re-initiated coverage on Broadcom with an Overweight rating and a $1,550 price target, citing the chip maker’s leadership position in AI-related products.
“We are particularly constructive on the cloud datacenter end market, with Broadcom’s leadership in switching/routing, its custom chip (ASIC) opportunities across datacenter and artificial intelligence opportunities,” he wrote.
Broadcom stock fell 0.8% to $1,223.23 in early trading Tuesday.
The chip maker is the leading player in the high-end AI ASIC — application specific integrated circuits — market. Broadcom helps large companies, such as Alphabet’s Google unit, design custom chips for AI, called TPUs or Tensor Processing Units. He cited Meta Platforms and Microsoft as other key customers.
Sur estimates Broadcom will generate $8 billion to $9 billion in AI revenue this year, primarily from its custom chip business. That level of revenue, he says, would rank Broadcom as the second largest AI chip supplier in the world. According to FactSet, Nvidia is forecast to make $76 billion in data center revenue this year — a number often used as a proxy for AI chip sales by analysts.
“Broadcom has codesigned every generation of Google’s TPU processor family with a stellar track record of execution and, more importantly, we believe that Broadcom has won/already designing Google’s next gen v6 TPU,” he wrote.
Broadcom shares are up about 98% over the past 12 months, compared with the 43% rise for the iShares Semiconductor exchange-traded fund, which tracks the performance of the ICE Semiconductor Index. The Nasdaq Composite has risen 28% over the past year.
Write to Tae Kim at tae.kim@barrons.com