Broadcom on the Path to the Trillion-Dollar Mark: AI Chips Drive Stock Price

Broadcom shares saw a spectacular 14% rise on Friday as positive forecasts for the demand for custom AI chips brought the chip manufacturer closer to a market value of $1 trillion. Pre-market movements suggested that Broadcom could add around $120 billion to its $843 billion value. Additionally, the revenue forecast for the first quarter exceeded Wall Street estimates. Shares of competitor Marvell Technology also rose by a notable 5.3%. This year, Broadcom is a sought-after provider for major technology companies looking to reduce their reliance on expensive and scarce AI processors, which are traditionally sourced from leading supplier Nvidia. By developing its own advanced specialized chips, Broadcom was able to increase its share price by more than 62%. CEO Hock Tan predicted on Thursday that the AI market could offer revenue between $60 and $90 billion by fiscal year 2027. Broadcom has already acquired two significant hyperscale customers—a term that denotes large cloud providers. In fiscal year 2024, the company was able to capture more than $12 billion of the total $15 to $20 billion addressable AI revenue, including custom AI chips and networking equipment for data centers. Analysts from TD Cowen estimated that maintaining a roughly 70% market share in the fiscal year 2027 could lead AI revenues to exceed $50 billion. With these impressive figures, at least 16 brokerage firms raised their price targets for Broadcom shares, setting the median price at $210, representing a 16% price potential. Notably, Broadcom executives went particularly far in their presentation to offer investors dreamy prospects, painting a three-year picture of a huge AI revenue potential of $60 to $90 billion, as analyst Stacy Rasgon observed. Jokingly, Rasgon suggested that CEO Hock Tan might soon consider buying a leather jacket himself, similar to the distinctive style of Nvidia CEO Jensen Huang.