The Zhitong Finance App learned that BMO Capital Markets began to cover Broadcom (AVGO.US) and gave it a “outperforming market” rating, with a target price of 455 US dollars. BMO analyst Harsh Kumar said that Broadcom is a leading AI supplier in the field of custom ASICs (XPUs) and networks, and is also the second-largest AI chip company in the world after Nvidia.
An application-specific integrated circuit (ASIC) is a chip designed for a specific task. Companies like Google, OpenAI, and Anthropic use these custom chips to run their AI systems rather than just relying on Nvidia's general-purpose processors.
According to analysts, Broadcom has two core capabilities that are difficult to replace in the AI data center field: first, the company designs custom chips for large technology companies, and this work has continued for more than ten years; second, the company manufactures network components that enable thousands of chips to transfer data to each other at high speed. If data between chips cannot be transmitted quickly, the value of large AI clusters will be greatly reduced, and Broadcom is the core supplier in this critical field.
For these reasons, Kumar believes demand for Broadcom products will remain strong for the next two years. Broadcom cooperates with almost all mainstream cloud service providers and AI laboratories that develop their own chips. Broadcom management expects its AI chip revenue to exceed $100 billion by the 2027 fiscal year.
At the time this rating was released, Broadcom was in a period of intense news. According to reports, Broadcom is in talks to raise more than 60 billion US dollars through debt financing to finance AI chips for customers such as Anthropic. Blackstone and Apollo may participate, and the final financing amount may reach 100 billion US dollars.
The market has long feared that big customers such as Google will develop their own chips, thereby reducing their dependence on Broadcom. The BMO report refutes this pessimistic view. Google's continued expansion of spending and capacity targets has actually increased short-term demand for Broadcom systems. However, competitive risks remain. Maywell Technology (MRVL.US) announced an expansion of its custom chip cooperation with Google earlier this month, indicating that Broadcom is facing real competition in this field.
It is worth noting that Broadcom will announce its third quarter earnings report on September 2. As the world's leading semiconductor supplier, Broadcom's performance in the field of AI chips has attracted investors' attention. The company's revenue for the second fiscal quarter surpassed US$22 billion, up about 48% year over year.
Overall, Wall Street analysts are optimistic about Broadcom. The consensus rating is “Strong Buy,” with an average target price of $509.96, which is 43% higher than the current level.
