Broadcom is drawing fresh institutional investor enthusiasm as demand is expected to shift in the artificial intelligence chip race.
Analysts at Macquarie Equity Research launched coverage with an Outperform rating, citing the company’s dominance in application-specific integrated circuits (ASICs), reports Barron’s.
Broadcom, a California-based chipmaker, holds roughly three-quarters of the ASIC market. Analysts Arthur Lai and Paul Golding note that while Nvidia GPUs have been the undisputed leader in AI computing, demand for ASIC chips is projected to explode as more firms move beyond AI training and into workload execution.
“While ASIC requires longer design cycles and significant up-front investment, they offer unmatched performance per watt, system-level efficiency, and tighter integration across the compute rack.”
Lai and Golding believe ASIC will surge to more than $80 billion by 2028 from less than $11 billion in 2024, with Broadcom capturing the lion’s share.
“While smaller entrants such as MediaTek are beginning to emerge, we see Broadcom’s scale, track record, and customer relationships as key differentiators that should allow it to defend market leadership.”
The company’s software division adds a second profit engine, following its $61 billion acquisition of VMware in 2022. That deal means infrastructure software now makes up about half of Broadcom’s per-share earnings, with gross margins above 90%.
Broadcom stock has already climbed more than 50% this year, and Macquarie argues the rally still has legs, believing AVGO can hit $420. As of Monday’s close, AVGO was trading at $364.
Earlier this week, tech stock strategist Shay Boloor unveiled his bullish case for AVGO. He said Broadcom is a winner in the AI race after the firm bagged a $10 billion XPU deal with OpenAI.
“If intelligence is the new GDP, inference is the tax — and AVGO owns the meter. The $10 billion XPU award was full racks-in-a-box, bundling custom silicon, HBM, and Ethernet into time-to-capacity. XPUs now drive most of their AI semi mix, and each new cluster expands networking and software annuities.”
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