Broadcom (AVGO, Financial) shares popped up by 22% on Friday after the company reported strong quarterly results and announced a bold projection, predicting $90 billion in revenue from custom AI chips by 2027. The stock surge pushed the stock's valuation north of $1 trillion, and its peers in the semiconductor sector, including Marvell Technology (MRVL, Financial) and Nvidia (NVDA, Financial), also posted gains.
According to CEO Hock Tan, the serviceable addressable market for a custom AI accelerator, known as an XPU, could rise to between $60 billion and $90 billion by fiscal year 2027, thanks to key customers such as Google (GOOG, Financial) and Meta Platforms (META, Financial). But if Broadcom gets contracts from Microsoft (MSFT, Financial) or Amazon (AMZN, Financial), this figure would increase further, analysts said.
Increased investor confidence led Jefferies' Blayne Curtis to raise his price target for Broadcom to $225 from $205. Joseph Moore of Morgan Stanley raised his target to $233 and said the outlook was a relief that should lead to strong momentum through 2025. Evercore ISI's Mark Lipacis also put some bet on optimism, raising his price target to $250 from $201. Broadcom's custom AI chips, which analysts say will become a key driver of growth in the coming years, are the result of quickly growing demand for large language models.
