Broadcom shares rise on upbeat guidance, strong AI demand forecast from Investing.com

Investing.com – Broadcom on Thursday delivered upbeat revenue guidance for the current quarter and forecast booming demand for its custom AI chips over the next few years, sending its shares higher in extended trading.

Shares of Broadcom Inc ( NASDAQ: ) rose more than 14% in premarket trading on Friday.

For the three months ended Nov. 3, the chipmaker posted earnings per share (EPS) of $1.42 on revenue of $14.05 billion. Analysts polled by Investing.com had expected earnings per share of $1.39 on revenue of $14.07 billion.

Semiconductor solutions, their core business, jumped 12% to $8.23 billion, while infrastructure software grew 196% to $5.82 billion.

For 2024, semiconductor revenue was “a record $30.1 billion driven by AI revenue of $12.2 billion,” the company said. “AI revenue, which grew 220 percent year-over-year, was driven by our leading AI GPUs and Ethernet networking portfolio,” it added.

Looking ahead, the chipmaker said it expects first-quarter revenue of $14.6 billion, topping the consensus estimate of $14.55 billion.

But the key takeaway from the earnings call, according to Jefferies analysts, was management’s growing confidence that the service addressable market (SAM) for its three AI ASIC customers is forecast to reach $60-90 billion by fiscal year 2027 (January), on base on customer roadmaps and plans.

“That would be if all 3 were switched to ASICs over GPUs for cluster training, which is no guarantee, but highlights the magnitude of ASIC capabilities.” SAM would further expand if it acquired 2 additional hyperscaling clients,” the analysts note.

“Overall, we have become overly sympathetic to the near-term positioning, but we expect investors to return to the name, given better near-term AI revenue clarity and the significant long-term potential of the 1M kPU cluster,” they added.

Jefferies raised his price target for AVGO from $205 to $225.

Separately, analysts at Cantor Fitzgerald raised their price target to $250 from $225 and reiterated that Broadcom is their top pick.

“It is crystal clear to us that Broadcom is a clear AI user with a strong technology roadmap that should continue to deliver strong earnings growth,” the firm wrote.

Yasin Ebrahim contributed to this report.