By Arsheeya Bajwa
(Reuters) – Broadcom rose about 15% on Thursday after an upbeat full-year forecast highlighted insatiable demand for chips used to power AI-focused technology, while the announcement of a stock split added to the euphoria.
The increasing adoption of generative AI has increased demand for companies like Broadcom to provide chips and networking tools to support these intensive applications.
Broadcom, whose shares have risen 76% over the past 12 months to close at $1,495.5 on Wednesday, has joined Nvidia in an effort to make its shares more affordable with a 10-for-1 split.
“It’s a sure-fire way to make your shares rise,” said Triple D Trading analyst Dennis Dick, adding that the move was “straight out of Nvidia’s book.”
If profits hold, Broadcom will add about $100 billion to its market value. More than twelve brokers increased their price targets for the share.
Broadcom now trades at about 28 times forward earnings, compared with a price-to-earnings ratio of about 40 for Nvidia and rival Marvell Technology.
The company on Wednesday raised its forecast for annual revenue from AI-linked chips from $10 billion to $11 billion and raised its annual revenue and core profit forecasts.
Broadcom said it will make next-generation custom AI chips for “hyperscaler” customers, widely considered to include Alphabet’s Google and Meta platforms. The company said in March that it has added a third custom AI chip customer.
“We continue to view Broadcom as incredibly well positioned to benefit from rising generative AI investments over the long term,” Morningstar analysts said.
Broadcom’s software division benefited from the acquisition of VMware, which added $2.7 billion to second-quarter revenue.
“After this stunning earnings report and the announcement of a 10-to-1 stock split, if you don’t own Broadcom, you have a hole in your portfolio,” said Paul Marino, Chief Revenue Officer of GraniteShares, which owns Broadcom stock through his company has in possession. ETFs.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Anil D’Silva and Mohammed Safi Shamsi)
