Why Analysts Are Raising Broadcom Targets as AI Partnerships Shift the Growth Story
Broadcom's fair value estimate has been lifted from $370.36 to $386.68 per share. The change reflects higher growth expectations from AI partnerships and custom silicon, alongside a slightly lower discount rate that implies reduced perceived risk.
The core message from recent notes: execution is strong, AI demand is building, and custom chip deployments are moving from pitch to production. Investors are rewarding that momentum, while keeping an eye on competition and margins as larger projects scale.
What Wall Street Is Pricing In
- Multiple firms raised targets, many now between $360 and $460. Highlights: Barclays to $450, KeyBanc to $460, Mizuho to $430.
- OpenAI collaboration is a key driver. Barclays estimates ~$140B added compute demand; Mizuho sees a $150B-$200B multi-year opportunity.
- UBS expects EPS around $13.50 in 2027 and potentially above $20 in 2028 if large deployments ramp as planned.
- Mizuho, Piper Sandler, and Cantor Fitzgerald view Broadcom as a top AI beneficiary. Mizuho models FY28 AI revenue at ~$78B; Cantor calls Broadcom a leader in AI ASICs and networking.
- Strengths called out: custom silicon at hyperscale, rack-level solutions, customer diversification, and leadership continuity under CEO Hock Tan.
The Bear Case You Should Not Ignore
- Competitive risk: Nvidia's closer ties with OpenAI could pressure Broadcom and AMD on share and pricing as rivals increase capital intensity.
- Valuation: a chunk of future upside may already be reflected in current multiples.
- Profitability mix: rack-scale solutions may carry lower margins; Broadcom must prove it can scale large programs without eroding returns.
Latest Headlines That Could Move the Model
- Apple is rolling out its proprietary N1 wireless chip across iPhone 17, signaling reduced reliance on Broadcom (per DigiTimes).
- OpenAI, backed by Microsoft, plans mass production of an in-house AI chip co-designed with Broadcom to support internal workloads next year Financial Times reporting.
- MediaTek was chosen over Broadcom by Meta for a 2nm ASIC, with production slated for 1H27 DigiTimes coverage.
How the Fair Value Moved
- Fair value: $370.36 → $386.68
- Discount rate: 10.25% → 10.21%
- Revenue growth (projected): 26.63% → 29.12%
- Net profit margin: 42.78% → 42.63%
- Future P/E: 46.02x → 45.44x
In short: a modest re-rating on faster expected growth and slightly lower risk, with some margin and multiple discipline still in the model.
What to Watch Next
- Ramp schedules and unit economics for the OpenAI programs and other hyperscaler ASICs.
- Margin integrity as rack-scale solutions ship; watch product mix and pricing.
- Competitive bids from Nvidia and MediaTek on future 2nm+ designs.
- Customer concentration: OpenAI/Microsoft, Meta, and Apple insourcing trends.
- Cash needs: capital intensity, inventory builds, and working capital as big projects scale.
- Software mix and VMware integration as a hedge against hardware margin pressure.
- Valuation discipline: where upside scenarios are already embedded in the multiple.
Scenarios to Frame Your View
- Upside: OpenAI and other hyperscalers ramp on time; ASIC share gains; networking attach holds; EPS tracks toward >$20 in 2028; multiple stays elevated.
- Base: Staggered ramps; mild margin pressure from rack-scale; fair value holds in the high-$300s.
- Downside: Nvidia tightens its position at key accounts; Meta shifts more volume to rivals; Apple insourcing weighs on wireless; multiple compresses alongside margins.
Actionable Checklist for Finance Pros
- Review the latest 10-Q/earnings call for backlog, AI bookings, and margin commentary.
- Track hyperscaler capex plans and lead times for 2nm capacity.
- Monitor customer concentration and pricing on multi-year contracts.
- Reassess entry points if the forward P/E expands faster than AI revenue realization.
If you need a quick way to monitor AI infrastructure trends that affect budgets and forecasts, this curated list may help: AI tools for finance.
Get Daily AI News
Your membership also unlocks:
700+ AI Courses
700+ Certifications
Personalized AI Learning Plan
6500+ AI Tools (no Ads)
Daily AI News by job industry (no Ads)
