Broadcom's AI Prospects: Confidence in the Next Big Semiconductor Play

Broadcom, a leading semiconductor company, is being hailed as the next big player in the artificial intelligence (AI) industry, following in the footsteps of Nvidia. Despite some disappointment in its latest earnings report, Wall Street analysts are optimistic about Broadcom's AI growth potential.

Comparisons with Nvidia and High Expectations

Broadcom's shares experienced a 4.5% drop to $881.67 in premarket trading on Friday, likely due to comparisons with Nvidia's exceptional earnings results, which raised expectations for Broadcom. However, analysts believe that Broadcom's AI-related revenue will surpass $7 billion in the next fiscal year, up from approximately $3.8 billion this year. This impressive growth rate has bolstered support for the stock among analysts.

Strong Endorsements from Analysts

Deutsche Bank's Ross Seymore stated, "Overall, we continue to believe Broadcom is successfully engineering a soft landing, with its cyclical resilience, secular growth opportunities in AI, and potential accretion from VMware combining to yield attractive upside." Seymore raised his target price from $905 to $950 and maintained a Buy rating on the stock.

Broadcom's AI revenue projections have garnered significant support, positioning the company as the second largest U.S. chip company in the industry, second only to Nvidia. Analysts offered their continued backing following Broadcom's latest earnings report.

Positive Price Target Adjustments

KeyBanc's John Vinh raised the price target on Broadcom to $1,000 from $940, based on a price-to-earnings multiple of 19 times projected fiscal 2024 earnings, taking into account its upcoming VMware acquisition.

Rick Schafer at Oppenheimer also increased his price target for Broadcom to $990 from $900, using a P/E multiple of 22 times the research firm's expected earnings for Broadcom in its next fiscal year. Schafer noted, "We like Broadcom's sustained growth led by franchises DC/cloud, networking, wireless, and software. Reiterate Outperform."

Overall, Broadcom's AI prospects have positioned the company for significant growth. With strong endorsements from analysts and positive price target adjustments, Broadcom is poised to solidify its position in the semiconductor industry.