The chipmakers driving the artificial intelligence revolution have become darlings of the stock market. And while Nvidia is the undisputed winner of the chip wars so far, it could soon face a robust challenger.
Broadcom, a U.S. semiconductor maker, announced a 10-for-1 stock split and better-than-expected earnings in its second-quarter earnings report on Wednesday. In the report, Broadcom also forecast revenue of $51 billion for fiscal year 2024, slightly higher than expected. Shares rose in after-hours trading that day, trading for about $1,740 around 3 p.m. ET on Friday, up about 16% from their Wednesday opening price of around $1,500.
In a note to investors on Thursday, Bank of America raised its price target for Broadcom shares to $2,000 and raised its fiscal 2025 revenue forecast to $59.9 billion, which would be a 16% annualized gain. BofA cited semiconductor sales and the acquisition of software company VMWare last year.
“We reiterate Buy, considering it a top AI pick,” along with Nvidia, the analysts wrote, citing Broadcom’s potential growth in custom chips, Ethernet networking and VMWare upsells.
If BofA’s prediction comes true, Broadcom’s market cap would soar past $1 trillion and enter an exclusive club currently occupied by just six companies: Microsoft, Apple, Nvidia, Amazon, Alphabet and Meta.
Nvidia, valued at nearly $3.25 trillion, is the only chipmaker to reach a 13-figure market cap. Last week alone, it overtook both Amazon and Alphabet, and last week it briefly bumped past Apple for second place behind Microsoft before retreating to third.
Nvidia volume today is about the same as the next 10 most traded stocks combined. I don’t think I’ve ever seen such a big gap, it’s weird. pic.twitter.com/hJgprCM6vw
— Eric Balchunas (@EricBalchunas) June 5, 2024
The dominance of Nvidia, a company unknown to many consumers, is both simple and complicated. The short answer is that it produces chips that are becoming essential to every corner of the economy. The longer answer is that developers have been building code around Nvidia’s CUDA architecture for the past fifteen years, making it difficult to unravel.
According to PitchBook, more than $4 billion was invested last year in 93 separate efforts to do this. And earlier this year, the Unified Acceleration Foundation, or UXL, was formed by Intel, Google, Arm, Qualcomm, Samsung and other tech companies to develop open-source software to free AI developers beholden to CUDA.
This story originally appeared on Fortune.com
