Broadcom Inc.’s shares were poised to again close in record territory amid building enthusiasm for the company’s opportunities in artificial intelligence from analysts.
On Tuesday, JPMorgan analyst Harlan Sur wrote that the company’s custom-chip business appeared to be seeing “accelerating orders from Google for its advanced AI processor chip called TPU” in a sign of further momentum for the semiconductor company.
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Sur noted that Broadcom
AVGO,
expects to do $3 billion in revenue from total cloud custom chip (ASIC) shipments this year, which would already be ahead of the $2 billion it saw last year.
But he thought the company’s expectations may prove too conservative as the “recent order acceleration from Google for its TPU AI processors implies that Google’s TPU processor program alone could drive $3B in revenues and implying upside to management’s prior cloud ASIC revenue target this year.”
What’s more, TPU shipments from Google, which is part of Alphabet Inc.
GOOG,
GOOGL,
could drive upwards of $4 billion in revenue next year, Sur continued.
Google and Broadcom didn’t immediately respond to a MarketWatch request for comment on JPMorgan’s discussion of “accelerating” orders.
Broadcom “should be a strong beneficiary of the trends towards more custom chip designs as large cloud titans/OEMs look to drive more performance/power/cost/differentiation alongside their software frameworks,” Sur wrote.
Sur did not have a rating on Broadcom’s stock.
Read: From McDonald’s to Morgan Stanley, UBS says these stocks are favorably positioned for AI.
The stock was up 7.4% in morning trading Tuesday in the wake of an 11.5% Friday rally that marked the name’s biggest one-day percentage gain in upwards of three years.
Beyond Google, Broadcom has seen recent traction with Apple Inc.
AAPL,
which announced earlier in May that it struck a “multiyear, multibillion-dollar agreement” with the chip company through which Broadcom will develop 5G radio frequency components.
Evercore ISI analyst C.J. Muse expects “generative AI green shoots” to help “counterbalance clear signs of deterioration across several of AVGO’s key end markets” including wireless, storage and broadband.
He boosted his price target to $850 from $725 in a weekend note to clients, while keeping an outperform rating.
Broadcom is due to report fiscal second-quarter results June 1.
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