Broadcom’s Strong AI ASIC Developments Balanced with Cautious Market Outlook in Analyst’s Hold Rating

In a report released today, Aaron Rakers from Wells Fargo maintained a Hold rating on Broadcom (AVGO – Research Report), with a price target of $1,430.00.

Aaron Rakers has given his Hold rating due to a combination of factors surrounding Broadcom’s recent developments and market position. Broadcom’s stock (AVGO) is experiencing uplift from the announcement of its third custom AI ASIC customer, adding to its existing engagements with notable tech giants Google and Meta. Broadcom’s custom AI ASICs, which are expected to make up a significant portion of its AI semiconductor revenue in the fiscal year 2024, offer a substantial increase in density with solutions that include 12 HBM stacks, suggesting an edge over current leading GPUs. This promising development positions Broadcom well within the AI semiconductor space.
However, despite these advancements, the Hold rating may reflect a cautious outlook based on the competitive landscape and the company’s valuation. The analyst’s report underscores Broadcom’s strategic emphasis on Ethernet for AI cluster scaling, which is argued to offer better performance and lower costs compared to InfiniBand. With deployments of Ethernet-based AI clusters featuring Broadcom’s technology already in existence, the company is well-positioned to benefit from the growth in AI infrastructure. Yet, the Hold rating indicates that while the company’s prospects appear stable, there may be considerations such as market saturation or potential risks that prevent a more bullish recommendation at this time.

According to TipRanks, Rakers is a top 100 analyst with an average return of 26.1% and a 68.08% success rate. Rakers covers the Technology sector, focusing on stocks such as Intel, Nvidia, and Western Digital.

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Broadcom (AVGO) Company Description:

Broadcom, Inc. is a technology company offering semiconductor and infrastructure software solutions. It operates through two segments: Semiconductor Solutions (includes semiconductor solution product lines and IP licensing) and Infrastructure Software (Includes mainframe, BizOps and cyber security software solutions and FC SAN business). The company was founded in 1961 and is headquartered in San Jose, CA.