Broadcom shares have faced a recent decline due to investor concerns about the semiconductor industry, particularly in regards to artificial intelligence. Despite this, analysts at BofA Securities are still optimistic about the custom AI chip specialist. Shares of Broadcom rose slightly to $1,597.18 in early trading, down from highs above $1,800 earlier this month.
Analyst Vivek Arya at BofA Securities raised his price target on Broadcom to $2,150 from $2,000, maintaining a Buy rating on the stock. This new price target is based on a 35 times forecast of Broadcom’s earnings per share in 2025. Arya highlighted Broadcom’s diverse growth drivers, strong management team, and history of capital appreciation, dividend growth, and market-beating yield as reasons to support a premium multiple for the stock.
Despite being the eighth largest stock on the S&P 500, Arya noted that ownership of Broadcom by entities is below their weight in the market. Broadcom works with major companies such as Alphabet’s Google Drive and Metaplatforms, providing custom AI and network chips. It was also reported that Broadcom is collaborating with China’s ByteDance, the owner of TikTok, to develop an advanced AI processor.
Although this news was anticipated by analysts, it indicates that China may be a promising market for Broadcom’s competitors like NVIDIA. As the leader in AI chips, NVIDIA is restricted from exporting its most advanced chips to Chinese companies. Broadcom has recently increased its AI-related sales forecasts, now expecting it to reach at least $11 billion for the year, up from the previous forecast of $10 billion.
Overall, while there have been concerns about Broadcom due to industry uncertainties, analysts believe that the company’s strong fundamentals and growth potential in the AI market justify continued support for the stock. With a positive outlook on the company’s future prospects, investors may find confidence in backing Broadcom despite recent market fluctuations.
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https://www.barrons.com/amp/articles/broadcom-stock-price-buy-sell-ai-chips-c399321e
