Shares of silicon and software giant Broadcom (NASDAQ:AVGO) rose as much as 10% on Monday before trading in a 9.5% gain as of 1:15 PM ET.
Monday’s rally came after a nearly 25% surge on Friday, the day after the company reported earnings that included huge long-term expectations for the company’s artificial intelligence (AI) chip business.
Broadcom now appears to be seeing a follow-on rally on Monday, aided by a positive note from Wall Street analysts.
On Monday, Bank of America sell-side analyst Vivek Arya named Broadcom one of his top picks for the semiconductor sector for 2025, despite the stock’s recent rally. Arya wrote today that he believes artificial intelligence winners will continue to outperform in the first half of 2025. By the second half of the year, non-AI related chip sectors that are currently in a downturn, such as industrial chips, could outperform. Overall, Arya expects the semiconductor industry to grow 15%, on top of the 20% growth expected by 2024.
Broadcom’s crown jewel is its AI chip business, but it also makes chips for a variety of end markets. The fact that Arya still lists Broadcom as a top pick even after the stock rose 25% on Friday to reach a market cap of $1 trillion fuels very high optimism.
Based on fiscal fourth quarter earnings, in which revenue actually exceeded expectations, Broadcom CEO Hock Tan said on the conference call with analysts that the company expects to generate between $60 billion and $90 billion in AI-related revenues by 2027 chip revenue expected, compared to just $12.2 billion. in 2024. That seemed to confirm that the buildout of AI will take longer and be bigger than some skeptics had imagined.
Tan’s longer-term expectations likely caused analysts to rush to update their financial models to account for much higher revenue and earnings per share growth over the next three years, which is why the stock of Broadcom soar. As long as Broadcom’s results are in line with the new outlook, this move seems justified.
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Bank of America is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients have positions at Bank of America and Broadcom. The Motley Fool holds positions in and recommends Bank of America. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Why Broadcom Soared (Again) Today was originally published by The Motley Fool
