Broadcom (AVGO) stock rocketed Friday after the fabless chipmaker and infrastructure software provider forecast surging AI chip sales over the next three years.
On a conference call with analysts to discuss fiscal fourth-quarter results, Chief Executive Hock Tan said Broadcom’s market opportunity for artificial intelligence chips and related connectivity chips could reach $60 billion to $90 billion in the fiscal year that ends in November 2027. That compares with the $12.2 billion it generated in the segment in fiscal 2024, which ended Nov. 3.
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The $60 billion to $90 billion figure represents Broadcom’s serviceable addressable market from its three current hyperscale customers, Tan said. Analysts say those customers are Alphabet‘s (GOOGL) Google, Facebook parent Meta Platforms (META) and TikTok owner ByteDance.
“We are very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion,” Tan said.
The AI chip market opportunity figure does not include business from two other customers that Broadcom recently signed. Media reports have identified those customers as Apple (AAPL) and ChatGPT creator OpenAI.
“We are working very hard with them to get to production stage,” Tan said.
In custom AI accelerators, Broadcom competes mainly with Marvell Technology (MRVL). Those companies compete with AI-optimized graphics processing units from Nvidia (NVDA) and Advanced Micro Devices (AMD).
Broadcom Stock Rallies On Q4 Report
In morning trades on the stock market today, Broadcom stock rocketed more than 21% to 219.92.
With the move, Broadcom stock broke out of a double-bottom base with a buy point of 185.05, according to IBD MarketSurge charts.
At least 17 Wall Street analysts raised their price targets on Broadcom stock after the company’s fiscal Q4 report.
Broadcom earned an adjusted $1.42 a share, up 28% year over year, on sales of $14.05 billion, up 51%, in the quarter ended Nov. 3. Those results were roughly in line with analyst estimates.
Its outlook for the current quarter also matched expectations. For its fiscal first quarter, Broadcom predicted sales of $14.6 billion, an increase of 22% from the prior-year period. The company sees its AI chip sales rising 65% year over year to $3.8 billion in Q1.
Giving Investors ‘A Reason To Dream’
Bernstein analyst Stacy Rasgon reiterated his outperform rating on Broadcom stock and hiked his price target to 250 from 195.
“They went out of their way to give investors a reason to dream, painting a three-year (2027) picture with potential $60 billion to $90 billion AI revenue opportunity from current customers (likely pointing to material upside vs. current AI expectations for the company), and with more possible given two new potential customers currently engaged, if not yet ramping,” Rasgon said in a client note. “Overall the AI story seems to really be coming into its own.”
Rosenblatt Securities analyst Hans Mosesmann maintained his buy rating on Broadcom stock and upped his price target to 250 from 250.
Broadcom intends to begin shipping its next-generation custom AI chip, with circuits at 3-nanometer scale, in the spring. It is likely a year ahead of Marvell in making 3-nanometer chips, Mosesmann said.
Broadcom ranks second out of 39 stocks in IBD’s fabless semiconductor industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 96 out of 99.
Further, Broadcom is on the IBD Tech Leaders list.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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