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Investing.com - JPMorgan has reiterated an Overweight rating and $325.00 price target on Broadcom Limited (NASDAQ:AVGO), now a $1.28 trillion market cap semiconductor giant, following a meeting with the company’s leadership team, including CEO Hock Tan and CFO Kirsten Spears. According to InvestingPro data, the stock is currently trading near its 52-week high, with analysts maintaining a strong buy consensus.
The investment bank highlighted strong artificial intelligence (AI) demand trends driving growth in Broadcom’s custom AI XPU business and high-performance networking portfolio. This aligns with the company’s impressive 33.85% revenue growth over the last twelve months, as reported by InvestingPro. JPMorgan noted that inferencing workloads not previously accounted for in 2027 SAM forecasts could potentially lead to upside, though it’s too early in the adoption curve for definitive projections.
Broadcom is making progress on product development, with its 2nm 3.5D AI XPU product tape-out on track for this year, along with first-generation AI XPU products for two leading prospect engagements, believed to be with Arm/Softbank and OpenAI. The company is also seeing significant dollar content capture opportunities in scale-up networking, with 5-10x more content versus scale-up networking.
JPMorgan reported that Broadcom is experiencing a gradual "U" shape recovery in its non-AI semiconductor business, reflected in current bookings and order inflection, which could contribute to positive EPS revisions next year. The VMware business is expected to maintain strong growth until late 2026/2027, potentially reaching $20 billion in annualized revenues.
The company’s semiconductor operating margins are expected to continue expanding despite gross margin headwinds from the AI XPU business, with management focusing on reinvesting in the business over the next 1-2 years to capitalize on AI growth opportunities rather than pursuing M&A.
In other recent news, Broadcom Inc. reported quarterly earnings of $15.0 billion, meeting analysts’ expectations. The company’s semiconductor sales reached $8.4 billion, while its software division brought in $6.6 billion. Mizuho (NYSE:MFG) has raised its price target for Broadcom to $315, citing strong AI chip demand as a key driver, while Bernstein SocGen Group increased their target to $295, maintaining an Outperform rating. Fitch Ratings assigned a ’BBB’ rating to Broadcom’s proposed senior notes, highlighting the company’s strengthened financial flexibility due to robust AI demand and VMware’s virtualization products. Mizuho projects Broadcom’s gross margins will reach approximately 77% by fiscal 2026, with operating margins at 66%. The firm also expects free cash flow growth to reach $39 billion annually by fiscal 2026. Broadcom recently released VMware Cloud Foundation 9.0, designed for modern private cloud environments, enhancing its services portfolio. This release follows the company’s ongoing integration of VMware’s products after the acquisition.
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