JPMorgan has reiterated its ‘Overweight’ rating on Broadcom, with a target price of $400 by December 2026.
According to the JPMorgan Smart Finance App, JPMorgan released a research report stating that Broadcom (AVGO.US) remains the firm’s top pick in the semiconductor sector due to its diversified business model, first-class profit margin levels, and strong long-term growth trends in artificial intelligence (AI)/data centers and infrastructure. The bank reiterated its “Overweight” rating on Broadcom, with a target price of $400 by December 2026. This target price represents an approximate 16% upside from Broadcom’s closing price of $346.17 on Wednesday.
JPMorgan recently invited Broadcom’s Chief Financial Officer, Kirsten Spears, to a conference held in London. Discussions centered on robust AI demand trends, which have driven significant growth in Broadcom’s custom AI XPU business and boosted demand for its high-performance networking portfolio. Additionally, signs of recovery are emerging in non-AI semiconductor businesses (expected to drive growth next year), and sustained growth in the VMware business is still evident.
JPMorgan highlighted the following key takeaways from this discussion:
1) AI demand remains strong, with the Broadcom team advancing as expected across various potential collaborations. They are confident these customers will eventually move towards million-unit XPU AI clusters.
2) If CEO Hock Tan achieves $120 billion in AI revenue by 2030, the incentives tied to his recent employment contract will reach their maximum value. The team has historically exceeded targets multiple times.
3) The Broadcom team continues to demonstrate strong execution in product technology development, expecting to complete the tape-out of its first 2nm/3.5D packaging AI XPU product with a potential customer this year, establishing a leadership position – even ahead of standalone GPU peers.
4) The Broadcom team is moving up to a higher level, not only delivering chips but also providing customers with full AI rack-level deployments. Although lower margins result from cost pass-through, both gross profit and operating profit totals are increasing.
5) There are significant growth opportunities in scale-up, scale-out, and scale-across networks, with Ethernet fabric remaining the preferred technological architecture.
6) Orders for non-AI businesses are at an inflection point and beginning to rise. Signs of recovery are emerging in broadband, server storage, and enterprise networking. However, revenue recovery remains in a ‘U-shaped’ pattern, with acceleration expected after entering fiscal year 2026.
7) The Broadcom team anticipates that the transition to the VMware VCF platform will be completed by the end of fiscal year 2026 (indicating that its revenue will continue to grow at a strong double-digit year-over-year rate). Thereafter, the growth rate of infrastructure software is expected to return to the mid-to-high single-digit percentage range. Looking ahead, the Broadcom team will focus on reinvesting in business operations, particularly in large-scale AI growth opportunities, while continuing to return 50% of free cash flow and prioritizing debt repayment.
JPMorgan summarized that Broadcom is a leader in wireless, data center networking, AI/deep learning ASICs, storage and infrastructure silicon, hardware, and software, with broad exposure to positive trends across these end markets. Broadcom is a powerhouse in the technology infrastructure sector, possessing unparalleled scale and technical capabilities within the industry, ensuring its leading position across diversified end markets.