According to J.P. Morgan, Broadcom stock presents an appealing investment opportunity due to the growing demand for artificial intelligence (AI) semiconductors. Analyst Harlan Sur recently re-initiated coverage on Broadcom and assigned it an Overweight rating, along with a price target of $1,550. Sur highlighted Broadcom’s position as a leader in AI-related products as the main reason for this positive outlook.
Dominance in Cloud Datacenter Market
J.P. Morgan specifically praises Broadcom’s strong presence in the cloud datacenter end market. The company’s expertise in switching/routing and its custom chip (ASIC) opportunities across datacenters and artificial intelligence contribute to its advantageous position. Sur also points out that Broadcom assists prominent companies like Google and Microsoft in designing custom chips for AI, known as TPUs (Tensor Processing Units).
Revenue Estimates and Market Standing
Sur’s projections suggest that Broadcom will generate between $8 billion and $9 billion in AI revenue this year, primarily from its custom chip business. If achieved, this level of revenue would place Broadcom as the second-largest AI chip supplier worldwide. By contrast, Nvidia is expected to make $76 billion in data center revenue this year—a figure often used as a proxy for AI chip sales.
Leading Partner with Google
Broadcom’s collaboration with Google is a significant advantage. The chip maker has been involved in the development of every generation of Google’s TPU processor family, displaying a strong track record of execution. Moreover, J.P. Morgan believes that Broadcom has already secured the opportunity to design Google’s next-generation v6 TPU.
Promising Stock Performance
Over the past 12 months, Broadcom’s shares have climbed approximately 98%, surpassing the 43% rise of the iShares Semiconductor exchange-traded fund. This ETF monitors the performance of the ICE Semiconductor Index. Meanwhile, the Nasdaq Composite has experienced a 28% increase within the same period.
