There are solely a few handful of shares which have a $1 trillion market worth. The members embody a number of the hottest out there — Nvidia, Tesla, Apple, and Berkshire Hathaway, simply to call a number of. Towards the top of the final yr, the customized chipmaker Broadcom (AVGO 3.44%) went on a large run and joined the unique membership.
Nevertheless, after the extraordinary sell-off in April attributable to tariffs and the worldwide commerce conflict, Broadcom fell all the best way under a $700 billion market capitalization. After the latest rally that has ensued since mid-April, Broadcom has now rejoined the $1 trillion membership (as of Might 28).
However one Wall Avenue analyst thinks the social gathering has solely simply begun and that shares will quickly hit a brand new all-time excessive.
Not a competitor, however a complement to Nvidia
Whereas there will probably be no unseating Nvidia, lengthy thought of the king of the extra normal graphics processing unit (GPU) house, Broadcom has gained traction with its customized chips designed for extra particular work masses. As an illustration, one in every of Broadcom’s core merchandise is its customized application-specific built-in circuit (ASIC), known as XPU.
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The XPUs are presupposed to be higher for inference, which in AI means educating giant language fashions to leverage real-time information to see patterns and make forecasts that assist resolve particular duties. Broadcom works with hyperscalers like Meta Platforms and different key gamers within the AI sector like OpenAI to develop customized chips for his or her perspective companies and AI workloads.
Melius Analysis analyst Ben Reitzes views customized chips much less as a competitor to Nvidia and extra as a complement. “Corporations twin supply compute from each Nvidia and Broadcom for flexibility round completely different workloads — however all stay dedicated to each,” Reitzes mentioned in his latest analysis word. He additionally raised his value goal on Broadcom from $198 per share to $283, implying one other 19.4% upside from present ranges.
A part of Reitzes’ improve features a rerating to worth Broadcom at 30 instances his projected 2027 earnings as an alternative of a 22 a number of, as a result of the analyst sees a practical path to 43% compound annual development in income from AI processors over the subsequent decade. Broadcom has additionally introduced new clients for its customized AI chip options, probably growing its general market.
“With 7 XPU clients now confirmed, the serviceable addressable market may arguably be elevated later within the decade to a spread of $140-$210 billion — with Broadcom garnering properly over $70 billion in AI income later within the decade given its market share at these 7 clients,” Reitzes wrote. He additionally sees potential tailwinds as Broadcom scales its specialised networking chip enterprise and implements larger-than-expected share repurchases.
Can Broadcom hit new all-time highs?
The shares commerce at round 36 instances ahead earnings, so a 30 a number of will not be unrealistic if the corporate continues so as to add and retain clients. Broadcom continues to develop at a quick clip. Within the first quarter of 2025, the corporate grew income by 25%, whereas earnings per share elevated by over 300%.
Broadcom’s clients additionally embody a number of the strongest names within the AI sector. Most of those clients are money cows with huge capital expenditure (capex) plans. Whereas capex might ebb and stream, the race to create one of the best AI options has solely simply begun and these giant gamers are going to continually must innovate. I additionally suppose a inventory that’s working round or in tandem with Nvidia — and never as a direct competitor — is an effective place to function as a result of then Broadcom can roughly feed off Nvidia’s development.
Certain, Nvidia will at all times be the principle GPU participant, however Broadcom’s XPUs could be deployed alongside them and may also help AI workloads hone in on particular duties. For all of those causes, I must agree with Reitzes and assume {that a} new all-time excessive for the inventory is only a matter of time.
Randi Zuckerberg, a former director of market growth and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Bram Berkowitz has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Berkshire Hathaway, Meta Platforms, Nvidia, and Tesla. The Motley Idiot recommends Broadcom. The Motley Idiot has a disclosure coverage.
