In a note Tuesday, investment bank JPMorgan said that in a recent investor group meeting they hosted, Broadcom's (NASDAQ:AVGO) management highlighted significant growth opportunities in AI and its core semiconductor business.
Key executives, including President and CEO Hock Tan, President of Semiconductor Solutions Group Charlie Kawwas, and head of IR Ji Yoo, provided insights into the company's outlook.
Analysts at JPMorgan noted several important takeaways from the meeting. They said Broadcom continues to see strong year-over-year booking trends for its non-AI semiconductor business, which have persisted into the July quarter. This is complemented by sustained AI order momentum, suggesting robust demand across the board.
According to the bank, one of the most compelling points from the discussion was Broadcom's projection of a $150 billion opportunity in cumulative AI silicon revenue over the next five years. This figure is based on anticipated revenue of over $30 billion per AI customer, implying a 30-40% annual growth rate in AI semiconductor revenues during this period.
Broadcom's established position as a major player in the AI ASIC market and its strong technological capabilities are expected to enhance customer retention, especially as chip complexities increase.
Furthermore, JPMorgan says Broadcom's Ethernet networking solutions are gaining significant traction, with seven of the eight largest global AI clusters currently utilizing Broadcom Ethernet.
Analysts add that by next year, all eight of the largest AI clusters will be powered by Broadcom Ethernet. The adoption of co-packaged optics is also said to be approaching a critical juncture, which should further bolster their networking business.
Additionally, the expansion of enterprise AI is expected to drive customer conversion to VMware's full solution stack, presenting a multi-year revenue growth opportunity for Broadcom.
Overall, JPMorgan reiterated its Overweight rating on Broadcom, citing accelerating AI fundamentals and improving non-AI semiconductor business as key drivers of strong earnings growth.