Broadcom Positioned For Growth With Meta 'Next Multi-Billion Dollar' AI ASIC Customer: JPMorgan

Broadcom Inc. AVGO has emerged as a key player in the semiconductor industry poised for significant growth, particularly with Meta Platforms Inc META, the parent company of Facebook, stepping into the spotlight as its next multi-billion-dollar AI ASIC partner.

With a focus on cutting-edge technology and strategic partnerships, Broadcom’s trajectory toward expansion and market dominance is becoming increasingly apparent. Analysts are busy reviewing the stock for any direction as to future trajectory.

The Broadcom Analyst

JPMorgan analyst Harlan Sur shed light on Broadcom’s promising trajectory, particularly with Meta emerging as the “next multi-billion dollar per year AI ASIC customer.” With an Overweight rating and a price target of $1,700 by December 2024, Broadcom is poised for substantial gains.

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The Broadcom Thesis

Capturing Next-Gen 3nm AI ASIC Chip Wins

Broadcom has been successful in capturing next-gen 3nm AI ASIC chip wins at both Alphabet Inc GOOG GOOGL dba Google and Meta. These wins are expected to significantly contribute to Broadcom’s revenues, with projections indicating Meta becoming the next “multi-billion-dollar customer” for Broadcom’s AI ASIC solutions.

Over the past five years, Broadcom has established itself as a leader in custom chip (ASIC) development, particularly in collaboration with tech giants like Google and Meta. These partnerships have driven Broadcom’s AI ASIC revenues to over $9 billion this year, up from $3.5 billion last year.

According to Sur, Broadcom is on track to release its 3nm AI accelerator (TPU) custom chip programs with Google (TPU v6) and Meta (MTIA TPU) by mid-2024. The ramp-up in production is expected to occur in the second half of the year and continue through 2025

“Overall we estimate that Google and Meta combined will drive $9B+ in AI ASIC chip revenues for Broadcom this year, (Google ~$8B+ and Meta around $500M-$1B), up almost 2.5x over CY23,” the analyst wrote.

2.5X Growth Potential Vs. 2023

Sur also drew attention to the fact that Broadcom has “won follow-on/next-gen 3nm AI TPU ASIC wins at both customers targeted for tape-out in CY25 with ramp in back-half 25 and into CY26.”

Broadcom’s advancements in its 2nm ASIC platform further support this sustained growth in AI ASIC revenues, with the platform already securing its first win with a high-performance computing customer.

The company anticipates achieving total AI semiconductor shipments of $10-$12 billion this year, driven by the expected increase in demand from its third AI ASIC customer, likely Bytedance/TikTok, and strong market interest in Broadcom’s Tomahawk 5 and Jericho 3 switching/routing chipsets, as well as its PCIe Gen5/Gen6 switching solutions. This projection signifies a growth of 2.5X compared to the figures recorded in 2023.

AI-driven Demand Remains Robust

Overall, Broadcom’s ASIC design win and revenue pipeline remain robust, bolstered by strong AI-driven demand in the networking semiconductor market. With anticipated positive revenue and EPS revisions throughout the year, Broadcom positions itself for continued success and growth in the AI semiconductor industry.

AVGO Price Action: Shares of Broadcom were down 0.25% to $1336.10 on Monday.

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