Broadcom (AVGO, Financial) shares jumped 22% on Friday after the company reported strong quarterly results and announced a bold projection, forecasting $90 billion in revenue from custom AI chips by 2027. The stock surge pushed the stock’s valuation north of $1 trillion, and its peers in the semiconductor sector, including Marvell Technology (MRVL, Financial) and NVIDIA (NVDA, Financial), also posted gains.
The exploitable market for a custom AI accelerator, known as XPU, could reach between $60 billion and $90 billion by fiscal 2027, driven by key customers such as Google, according to CEO Hock Tan. (GOOG, Financial) and metaplatforms (META, Financial). But if Broadcom gets contracts from Microsoft (MSFT, Financial) or Amazon (AMZN, Financial), this figure will increase further, analysts estimate.
Increased investor confidence led Jefferies’ Blayne Curtis to raise his price target for Broadcom from $205 to $225. Morgan Stanley’s Joseph Moore raised his target to $233 and said the outlook was a relief that should lead to strong momentum through 2025. Evercore ISI’s Mark Lipacis also added to the optimism, raising his target priced from $201 to $250. Broadcom’s custom AI chips, which analysts say will become a key driver of growth in the coming years, are the result of rapidly growing demand for large language models.
This article first appeared on GuruFocus.