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Investing.com - Bernstein SocGen Group has reiterated an Outperform rating on Broadcom (NASDAQ:AVGO), a $1.68 trillion semiconductor giant with 28% year-over-year revenue growth, with a price target of $400.00, citing potential for positive earnings revisions driven by artificial intelligence revenue growth.
Bernstein analyst Stacy Rasgon noted that while AI buildout might come at the expense of somewhat lower margins, the firm does not expect gross margins to "plummet" despite potential adjustments. According to InvestingPro data, Broadcom maintains impressive gross profit margins of 77.19%.
The analyst acknowledged investor concerns about margin implications from AI expansion but indicated that current Street gross margin estimates are likely too high.
Rasgon expressed belief that revenue estimates are probably too low, suggesting considerable opportunity for further positive EPS revisions moving forward.
The reiteration comes as Broadcom continues to position itself in the growing AI semiconductor market, with Bernstein maintaining its bullish outlook on the company’s growth trajectory. While trading near its 52-week high with a P/E ratio of 91.44, InvestingPro analysis indicates the stock is currently overvalued relative to its Fair Value.
In other recent news, Broadcom has announced a strategic collaboration with OpenAI, involving the deployment of approximately 10 gigawatts of accelerators and network systems for next-generation AI clusters. This partnership has led Deutsche Bank to raise its price target for Broadcom to $400, maintaining a Buy rating. Similarly, Mizuho has increased its price target to $430, citing the potential value of the partnership, which could be worth $150-200 billion over multiple years. CFRA has praised Broadcom’s visibility and pipeline following this multi-year partnership, which will see Broadcom supplying custom silicon and networking chips to OpenAI starting in the second half of 2026.
Wolfe Research has reiterated its Peerperform rating on Broadcom, emphasizing the company’s provision of Ethernet-based solutions for scale-up and scale-out capabilities. Melius Research has also reiterated its Buy rating and $415 price target, highlighting significant revenue potential from the OpenAI deal. The firm clarified that OpenAI is not the "Customer 4" previously mentioned by Broadcom’s CEO, suggesting another large language model company might be involved. These developments indicate strong interest and potential growth for Broadcom in the AI sector.
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