Silicon and software giant shares Broadcom (NASDAQ:AVGO) rose as much as 10% on Monday, before stabilizing at a 9.5% gain at 1:15 p.m. ET.
Monday’s rally followed a nearly 25% rise on Friday, the day after the company reported earnings that contained impressive long-term guidance for its artificial intelligence (AI) chip business.
It appears that Broadcom is now experiencing a subsequent rally on Monday, helped by a positive note from a Wall Street analyst.
On Mondays, bank of america Sell-side analyst Vivek Arya named Broadcom as one of his top picks in the semiconductor sector for 2025, despite the stock’s recent rally. Arya wrote today that he believes the winners in AI will continue to outperform in the first half of 2025. Then, towards the second half of the year, non-AI chip sectors that are currently in a downdraft, like industrial chips, could achieve better results. Overall, Arya predicts that the semiconductor industry will grow at a rate of 15%, in addition to the 20% increase estimated for 2024.
Broadcom’s crown jewel is its AI chip business, but it also makes chips in several end markets. The fact that Arya continues to list Broadcom as a top pick, even after the stock rose 25% on Friday and surpassed a $1 trillion market cap, is fueling very high optimism.
Following fiscal fourth-quarter earnings, in which revenue actually missed expectations, Broadcom CEO Hock Tan said on the conference call with analysts that the company expects between $60 billion and $90 billion million in AI-related chip revenue in 2027, up from just $12.2 billion. in 2024. This seemed to confirm that the development of AI will be longer and greater than some skeptics might have imagined.
Tan’s long-term guidance likely sent analysts scrambling to update their financial models to account for much higher revenue and earnings per share growth over the next three years, which is why Broadcom stock is going up. As long as Broadcom’s results match its new outlook, the move seems justified.
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