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Investing.com - Broadcom Inc (NASDAQ:AVGO) faces supply constraints as the main challenge in its march toward $100 billion in data center sales, according to a preview note from Bank of America ahead of the company’s December 11 earnings report. With a market capitalization of $1.84 trillion and trading near its 52-week high of $403, InvestingPro data suggests the semiconductor giant appears overvalued based on Fair Value calculations.
BofA expects upside to Broadcom’s data center sales driven by demand for Google’s Gemini 3 inferencing. Consensus estimates for data center sales (including networking) stand at $5.7 billion for fiscal Q4 2025 and $38.3 billion for fiscal year 2026, representing a 98% year-over-year increase including $10 billion for Anthropic. This growth trajectory builds on Broadcom’s already impressive 28.01% revenue growth over the last twelve months, with total revenue reaching $59.93 billion.
The outlook for fiscal years 2027 and 2028 shows continued strong growth of 55% and 45%, reaching $59.3 billion and $85.7 billion respectively, with a bull-case scenario approaching $100 billion. Potential upside comes from Google’s ability to add external TPU customers and faster adoption of Broadcom’s custom chips and networking solutions at OpenAI, Apple, xAI, and potentially Microsoft. Broadcom’s impressive gross profit margin of 77.19% positions it well to capitalize on this expansion. InvestingPro identifies several additional strengths, including 16 consecutive years of dividend payments, with comprehensive analysis available in the Pro Research Report.
BofA’s Asia colleagues suggest demand for TPU could reach as high as 2.5 million units for calendar year 2025 and 4.5-5 million units for 2026.
The firm identified several downside risks, including supply constraints due to Nvidia’s ability to secure wafer, packaging, and memory supply; uncertainty in custom chip programs; and potential low-end competition from Mediatek at Google’s v8E TPU with an approximate $2,500 average selling price.
In other recent news, Broadcom has been in the spotlight with several significant developments. The company announced the release of its Brocade X8 Directors and Brocade G820 56-port switch, marking the industry’s first 128G Fibre Channel platforms tailored for AI workloads. These platforms boast quantum-resistant encryption and embedded SAN AI technology for enhanced data protection and management. Analyst firms have also shown confidence in Broadcom’s potential, with BofA Securities raising its price target to $460, citing its involvement in Google’s TPU ecosystem. Additionally, Raymond James assumed coverage of Broadcom with an Outperform rating and a $420 price target, highlighting the company’s position in the AI sector. Meanwhile, Lumentum received a price target increase from Mizuho to $325, driven by Google’s plans to expand TPU deployments. These recent developments reflect the ongoing strategic movements within the technology sector.
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