Broadcom is poised for significant growth in 2025, with expectations of outperforming Nvidia as major tech companies diversify suppliers and reduce reliance on singular sources. According to Stephen Yiu, fund manager of the Blue Whale Growth Fund, who told CNBC, companies like Microsoft, Amazon, Google, and Meta Platforms are not only purchasing Nvidia’s GPUs but are also developing custom chips
Broadcom expected to outperform Nvidia in 2025
Broadcom’s stock surged over 126 percent in 2024, driven by the company’s reported AI revenue, which more than tripled to $12.2 billion. Its market capitalization recently crossed $1 trillion, making it one of Blue Whale’s top ten positions. Chief Executive Hock Tan emphasized that Broadcom is collaborating with major cloud customers, identified as Meta, Alphabet, and ByteDance, to develop custom AI chips. Each of these customers plans to deploy 1 million AI chips by 2027, further reflecting the shift in AI chip spending toward tailored solutions.
Yiu maintains that while Nvidia remains the market leader with a value of $3.2 trillion, the considerable growth potential for Broadcom should not be overlooked. “For a $1 trillion company to grow 50% to become $1.5 trillion is reasonable,” he explained. This contrasts with Nvidia, which would need to add another $1.5 trillion to match that growth, a much more daunting prospect given its size.
Wall Street analysts bullish on Broadcom’s potential
Broadcom’s prospects have garnered favorable reviews from Wall Street analysts. Goldman Sachs raised its target price for the stock from $190 to $240, citing increased confidence in the company’s revenue and earnings growth outlook. Morgan Stanley characterized Broadcom as “one of the most compelling ways to play AI semis” over the coming years, while Bernstein analysts also raised their target price to $250, noting that the AI narrative is gaining traction.
Despite this enthusiasm, Bank of America has issued a cautionary note regarding competition from Nvidia, specifically its stronghold in enterprise customers and merchant silicon. As the AI semiconductor market evolves, investors are closely monitoring these developments. While Yiu has cut his fund’s position in Nvidia to below 10 percent, he continues to see value in Broadcom, emphasizing the potential for outperformance in the shorter term.
AI boom sends Broadcom soaring to $1 trillion market cap
Jefferies analyst Blayne Curtis highlighted Broadcom’s unique position within the chip sector as the demand for application-specific integrated circuits (ASICs) grows according to a Morningstar report. These ASICs, which facilitate AI applications, are increasingly becoming essential for both training and inference processes. Curtis assures that as complexities and volumes of these chips rise, Broadcom stands to benefit significantly. Average selling prices are expected to rise from less than $5,000 to potentially “tens of thousands of dollars per unit” as the technology evolves.
Broadcom outlined a serviceable addressable market ranging from $60 billion to $90 billion in AI by 2027, contingent on three current customers. This market might expand based on two other pre-production customers’ actions, indicating ample growth opportunities. Curtis has adjusted Broadcom’s price target to $300, reflecting a 37% increase above the stock’s recent close of $218.32. His bullish outlook continues despite fluctuations within the broader tech sector.
Investors remain cautious, noting Broadcom’s recent rally of over 30% this month alone. With such rapid growth, the CNBC Investing Club indicated it would have reconsidered its position if not restricted. Current market conditions suggest a wait-and-see approach, as developments unfold in both companies’ strategies and market positioning.
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Featured image credit: Broadcom
