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Investing.com - Broadcom Limited (NASDAQ:AVGO), a semiconductor giant with a market capitalization of $1.69 trillion and an "GREAT" InvestingPro Financial Health score, received a reiterated Peerperform rating from Wolfe Research following the company’s announcement of a 10 GW deal with OpenAI.
The agreement involves rack-scale systems designed by Broadcom, with deployment scheduled to begin in the second half of 2026 and continue through the end of 2029. Broadcom emphasized that beyond custom XPUs, the company is providing Ethernet-based solutions for scale-up and scale-out capabilities for these rack systems.
While Broadcom did not specify the financial value of the deal, Wolfe Research noted the numbers are likely significant. The research firm used industry comparisons, citing NVIDIA’s expectation of $35 billion per GW content and AMD’s estimated $15 billion per GW for its OpenAI deal, suggesting Broadcom’s content would likely be less than $15 billion per GW. With impressive gross profit margins of 77.19% and 26 analysts recently revising earnings upward according to InvestingPro, the company appears well-positioned to execute on this opportunity.
Notably, Broadcom’s chip president stated on CNBC that the company does not yet have a $10 billion purchase order from OpenAI, suggesting that the $10 billion order announced during Broadcom’s last earnings call came from a different customer and that the OpenAI deal would be incremental.
Wolfe Research estimates that even at $10 billion per GW, the OpenAI agreement could represent approximately $100 billion in revenue over 3.5 years starting in the second half of 2026, translating to $25-30 billion in annual revenue from OpenAI alone, though questions remain about the margin structure of Broadcom’s ASIC business. The company has already demonstrated strong revenue growth of 28.01% over the last twelve months, though InvestingPro analysis suggests the stock is currently trading above its Fair Value. For deeper insights into Broadcom’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Broadcom Inc. has announced a significant multi-year collaboration with OpenAI to develop and deploy 10 gigawatts of custom AI accelerators. This partnership is expected to commence deployments in the second half of 2026 and conclude by the end of 2029. The collaboration builds on existing agreements between the two companies for co-development and supply of AI accelerators. Meanwhile, Melius Research has reiterated its Buy rating on Broadcom, citing the revenue potential from this OpenAI deal, although OpenAI has not yet submitted a purchase order. Aletheia Capital also initiated coverage on Broadcom with a Buy rating and a $400 price target, expecting AI revenue to double year-over-year in fiscal years 2026 and 2027. Bernstein SocGen Group maintained its Outperform rating and a $400 price target, highlighting strong compute demand and confidence in Broadcom’s growth trajectory. In a competitive development, Cisco Systems has announced new chip technology aimed at connecting AI data centers, challenging Broadcom’s position in the AI networking market. Cisco’s new components are designed to support AI training processes requiring massive data transfers, potentially impacting Broadcom’s market share.
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