Updated at 9:35 AM EST
Broadcom shares soared to a fresh record high in early Friday trading as Wall Street analysts rushed to overhaul their price targets on the chipmaker following its quarterly earnings and bullish near-term update.
Broadcom ( AVGO ) has established itself as a key player in the AI-investment thesis. This position reflects both its specialized networking gear, which determines the speed at which information collected in one network is passed along to the next, and its ASIC chips, which help giant providers of cloud networking infrastructure and services like Alphabet ( GOOGL ) and Meta Platforms ( META ) boost the speed and reliability with which they process information.
The shares have added around $240 billion of market value this year. The gains have more than doubled the Nasdaq benchmark, as investors bet that Broadcom's place in the artificial-intelligence goldrush will continue to expand.
Broadcom CEO Hock Tan, in fact, told investors on a conference call late Thursday that the group's potential market for both its networking and ASIC offerings could rise to $90 billion over the next two years.
"We are seeing a destination 2027 or milestone where the deployment of those large-scale AI clusters each on single fabric pretty much to run those [large language models] will come to $60 billion to $90 billion in that one-year period and collectively, all three of them," Tan said. (LLMs are AI that generates human language after being trained on massive amounts of data.)
Bullish midterm outlook for Broadcom
"This is not revenue, by the way," he added. "It's the revenue opportunity for us. It's what I call a serviceable addressable market for three of our hyperscale customers."
That bullish outlook followed a solid set of earnings for the group's fiscal fourth quarter, which ended in September, and a robust forecast for revenue over the three months ending in December.
Related: Analyst resets Broadcom stock price target before earnings
Broadcom posted fourth-quarter earnings of $1.42 a share, topping Wall Street forecasts by around 4 cents, with revenue rising 50% from a year earlier to $14.05 billion.
The growth rate for AI revenue will improve to around 65% in the current quarter, suggesting a tally of $3.8 billion, Broadcom said. That compares with a 10% growth rate for its overall chip sales, which translates into a top line of $14.6 billion.
UBS: Broadcom AI opportunity expands
UBS analyst Timothy Arcuri, who added $20 to his Broadcom price target to $220 a share, said the highlight from last night's update was its "messaging on its expanding AI opportunity".
"Hyperscale customers are leaning into custom ASIC programs with roadmaps that incorporate increasing levels of ethernet-based networking content with an eye towards super-scale million-XPU clusters – and all of this potentially translates into an AI SAM expansion of 4-5 times for AVGO over the next three years," he said.
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"On top of this, Broadcom is courting two additional hyperscale customers that could each be of similar magnitude (in terms of revenue opportunity) to its three current customers, providing a further upside lever to revenues in coming years." Arcuri added.
The hyperscalers are the cloud-computing giants.
Broadcom: Solidifying AI-chip position
KeyBanc Capital Markets analyst John Vinh said the fourth-quarter results and outlook "[solidify Broadcom's] position as a leading custom AI ASIC provider." He raised his price target by $50 to $260 a share.
Cantor Fitzgerald analyst C.J. Muse, meanwhile, noted Broadcom's hint that it's working with Apple ( AAPL ) in "multiyear roadmaps, suggesting that the rumored loss of the WiFi Combo chip may be inaccurate."
Bloomberg reported earlier this week that Apple was close to making an in-house chip for its Bluetooth and WiFi connections under a project named Proxima.
The tech-focused website the Information, meanwhile, reported that Broadcom was working with the iPhone maker to develop an AI-processing chip using Taiwan Semiconductor's N3P processing platform.
"It is crystal clear to us that Broadcom is a clear beneficiary of AI with a strong technology roadmap ahead that should continue to deliver strong earnings growth," added Muse, who lifted his price target $25 to $250 a share following last night's update.
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Other price-target changes include those of Evercore ISI analyst Mark Lipacis, who lifted his $9 to $250 a share, and Morgan Stanley's Joseph Moore, who took his to $233 from $180.
Citigroup analyst Christopher Danely boosted his price target $15 to $220 a share while Bank of America's Vivek Arya took it $35 higher to $250.
Broadcom shares were marked 19.3% higher in early Friday trading to change hands at $215.50 each, a move that would extend the stock's year-to-date gain to around 95%.
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