Interest in artificial intelligence (AI) has surged recently, impacting the tech sector significantly.
Broadcom (AVGO 0.48%) is a key player, providing semiconductors and technology essential for AI. This role has boosted its market cap by over 100% in the past year and led to a notable 10-for-1 stock split.
After strong fiscal Q3 results last month, Wall Street is more optimistic, raising price targets for Broadcom. Notably, Mizuho Securities analyst Vijay Rakesh has raised his price target to $220, suggesting a 21% potential gain in the next 12-18 months.
Custom AI Chips
Rakesh believes Broadcom’s AI potential isn’t fully reflected in its stock price. The company’s custom silicon division, offering application-specific integrated circuits (ASICs), could bring in annual revenues of over $16 billion. The overall ASIC market is predicted to exceed $56 billion soon, representing a significant growth opportunity.
In Q3 of fiscal 2024 (ending August 4), Broadcom’s revenue rose 47% year-over-year, driven by its AI chip products and data center solutions.
Broadcom shares are currently priced at 37 times forward earnings, appearing attractive given the stock’s impressive 2,530% growth over the last decade.
With these positive indicators, Broadcom is a buy.
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