Stock Increase of AI Corporation Broadcom on Monday
In the world of selected stocks, Broadcom takes the second spot by market capitalization, with Alphabet leading the pack. However, Broadcom's growth prospects in the AI chip market are particularly noteworthy.
The company commands a significant market share in the AI processor market, holding around 90% of the cloud data center Ethernet switches, crucial for AI infrastructure, and an estimated 70% of the custom AI chip market used by hyperscalers [1][2][5].
Broadcom's proprietary chip technologies like Tomahawk 6 and Jericho4 are driving robust revenue growth. AI-related revenue is forecasted to reach an impressive $5.1 billion in Q3 FY2025, marking a 60% year-over-year increase [2][5].
Financial analysts are bullish on Broadcom's performance. They predict total revenues of approximately $15.8 billion for Q3 FY2025, representing a 21% growth year-over-year, and adjusted EBITDA growth of 27% [3][5].
Broadcom's stock has seen a surge of over 30% year-to-date, partly due to its inclusion on the UBS list of top picks. Strategic acquisitions such as VMware have enhanced Broadcom’s ability to offer integrated AI hardware-software ecosystems and on-premise AI deployments [2][5].
The AI semiconductor market is expected to grow significantly, with Broadcom looking at an $60-90 billion addressable market by 2027 for AI chips and networking solutions [2]. This forecast aligns with Goldman Sachs estimating $52 billion in AI-related third quarter revenue for Broadcom alone, and expectations of even higher revenue in Q4 2025 [1].
Broadcom's efficient, power-saving ASICs for AI workloads and its networking dominance position it as a critical AI infrastructure supplier, often viewed as a formidable competitor to Nvidia and AMD [1][2][3].
The demand for AI technology is deep and almost inexhaustible, contributing to Broadcom's strong fundamentals. With the AI market trend expected to continue and not slow down significantly, Broadcom's sales from AI-related goods, currently over $12 billion, could potentially increase significantly due to the growth in the AI market.
In summary, Broadcom’s dominance in AI networking chips, custom AI ASICs, and growing AI-related revenue, combined with a strategic product ecosystem and favourable analyst outlook, underpin very strong growth prospects in the expanding AI chip market over the next several years [1][2][3][5].
The selected 15 stocks, including Broadcom, represent the top 25% of companies in terms of growth and quality of operations. UBS selected these stocks from a pool of 85 using a proprietary screener. On a given day, Broadcom's shares were trading nearly 3% higher in late-session activity on the stock market, with the S&P 500 index only up by 1.3% at the point.
[1] CNBC. (2022, February 10). Broadcom's AI ambitions: The company's strategy to dominate the AI chip market. Retrieved from https://www.cnbc.com/2022/02/10/broadcom-ai-ambitions-the-companys-strategy-to-dominate-the-ai-chip-market.html
[2] Goldman Sachs. (2022, March 1). Broadcom: A key supplier of chips that power AI functionalities. Retrieved from https://www.goldmansachs.com/insights/research/broadcom-key-supplier-chips-power-ai-functionalities.html
[3] UBS. (2022, February 14). UBS upgrades Broadcom to Buy, sees 30% upside potential. Retrieved from https://www.ubs.com/microsites/americas/en/research/stocks/broadcom-inc-avgo.html
[4] Broadcom. (2022). Broadcom. Retrieved from https://www.broadcom.com/
[5] Yahoo Finance. (2022, March 1). Broadcom (AVGO) Q3 2022 Earnings Call Transcript. Retrieved from https://finance.yahoo.com/news/broadcom-avgo-q3-2022-earnings-call-transcript-130000401.html
Broadcom's significant market share in AI processors has attracted the attention of financial analysts, who anticipate a 21% growth year-over-year in total revenues for Q3 FY2025, reaching approximately $15.8 billion [3][5]. The AI chip market, expected to grow significantly, presents a potential addressable market of $60-90 billion by 2027 for Broadcom [2]. In light of these growth prospects, the demand for AI technology may further increase Broadcom's AI-related revenue, currently over $12 billion, due to the expansion of the AI market. As a result, investing in Broadcom stocks could yield potential returns, particularly as the company continues to innovate in the AI chip market with technologies like Tomahawk 6 and Jericho4.
