This Chip Company Has a Multi-Year $100-$125 Billion AI Opportunity, According to BofA

Bank of America analysts recently underscored Broadcom’s strong position in the AI sector, forecasting significant long-term potential. Following a meeting with Broadcom’s leadership team, BofA reiterated its Buy rating on the stock and increased the price target to $215, highlighting a substantial multi-year opportunity estimated between $100 billion and $125 billion in AI.

The report indicates that Broadcom’s AI-related revenues are set to grow rapidly, projecting they will account for $12 billion, or 24% of the company’s total sales in the fiscal year 2024. The total addressable market for Broadcom is expected to be driven primarily by internal workloads at major hyperscale customers, leading to the deployment of large custom chip clusters, with estimates suggesting up to 1 million XPU clusters over time.

BofA emphasizes Broadcom’s advantageous position within the AI landscape, especially in networking, which is anticipated to increase its share of AI spending from 15-20% to 20-25% in the coming years. Analysts explained that by connecting XPUs, Broadcom can capture a larger segment of the market, and the company is also developing co-packaged optics, although deployment is still a few years away.

In addition to AI, the bank acknowledged Broadcom’s software division, specifically VMWare, which is transitioning to a subscription model. This transition is expected to contribute significantly to Broadcom’s long-term growth, with an estimated compound annual growth rate (CAGR) of 5-10%.

Overall, Bank of America considers Broadcom a top pick, alongside other industry leaders like Nvidia and KLA, citing the company’s robust blend of AI computation, networking capabilities, recurring software revenue, and reliable cash returns through dividends.