On Friday, BofA Securities maintained its Buy rating on Broadcom Limited (NASDAQ:AVGO) shares, affirming a $215.00 price target. The endorsement follows a meeting at Broadcom's headquarters, attended by CEO Hock Tan, CFO Kirsten Spears, and IR head Ji Yoo, which drew a strong investor presence.
During the event, discussions centered on Broadcom's expanding role in the artificial intelligence (AI) market. The company anticipates its AI-related sales to reach approximately $12 billion, or 24% of its total sales, in the fiscal year 2024. This segment is part of a larger total addressable market (TAM) estimated between $100 billion and $125 billion, primarily driven by increasing internal workload demands.
Broadcom's networking segment is experiencing rapid growth, propelled by the expanding size of large language models. This growth is expected to lead to an increase in AI cluster sizes, from clusters of 100,000 accelerators or XPUs to clusters of 1 million over time.
The management provided a positive outlook for the near term, spanning the next 12 months. They reported good visibility in AI demand and assured investors of strong support and adequate supply from the Asia supply chain. This addresses investor concerns regarding packaging allocation, specifically the use of Chip on Wafer on Substrate (CoWoS) technology, and refutes any doubts about Broadcom's ability to meet demand.
Broadcom is recognized by BofA Securities as a top pick in the market, alongside other prominent companies. The firm's confidence in Broadcom is bolstered by its unique combination of hardware and software offerings, including AI compute ASICs, networking capabilities, and recurring software revenue from VMWare, as well as its track record of consistent double-digit dividend growth.
In other recent news, Broadcom has been making significant strides in the tech industry. The company recently issued $5 billion in senior notes, a strategic move aimed at repaying existing debt. This decision was followed by the unveiling of Sian™2, a 200G/lane PAM-4 DSP PHY designed to enhance data center connectivity for AI applications.
Broadcom's recent financial performance revealed a 47% year-over-year increase, with consolidated net revenue reaching $13.1 billion. The firm's partnership with Tower Semiconductor (NASDAQ:TSEM) for the production of Wi-Fi 7 RF front-end modules is also expected to enhance mobile connectivity performance.
Truist Securities maintained a Buy rating for Broadcom, adjusting the stock price target slightly upwards from $204 to $205. This adjustment was influenced by the company's recent financial maneuver of issuing bonds, leading to a minor increase in the projected earnings per share (EPS) for the calendar year 2025.
TD Cowen also maintained their Buy rating on Broadcom, emphasizing the company's progress in key growth areas such as Networking and AI. Baird reiterated its Outperform rating on Broadcom, highlighting a revised AI-related revenue forecast for fiscal year 2024 of $12 billion, due to robust demand from major cloud service providers.
These recent developments reflect Broadcom's ongoing activities in the capital markets and its commitment to maintaining a robust financial structure amid dynamic market conditions. The company's strategic financial decisions and positioning in the market continue to attract investor interest.
InvestingPro Insights
Broadcom's strong position in the AI market, as highlighted in the article, is reflected in several key metrics and insights from InvestingPro. The company's revenue growth of 32.04% over the last twelve months, with a notable 47.27% quarterly growth, aligns with the anticipated expansion in AI-related sales discussed in the meeting with management.
InvestingPro Tips indicate that Broadcom is a "Prominent player in the Semiconductors & Semiconductor Equipment industry," which supports its leading role in the AI compute and networking segments. The company's financial health is further underscored by its consistent dividend payments, having "maintained dividend payments for 15 consecutive years" and "raised its dividend for 14 consecutive years."
Investors should note that Broadcom is "Trading near 52-week high" and has shown a "Strong return over the last month" with a 17.71% price total return. This performance reflects the market's positive reception of Broadcom's AI strategy and growth prospects.
For those seeking a deeper analysis, InvestingPro offers 18 additional tips that could provide further insights into Broadcom's financial position and market outlook.
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