New York: Broadcom experienced a significant surge of approximately 15% on Thursday, fueled by an optimistic annual forecast underscoring the relentless demand for AI-centric chips. Adding to the excitement was the company’s announcement of a stock split.
The increasing adoption of generative AI has been a key driver for Broadcom, which provides essential chips and networking tools for these intensive applications. The company’s shares, which have climbed 76% over the past 12 months and closed at $1,495.50 on Wednesday, are following Nvidia’s lead in making their stock more accessible through a 10-for-1 split.
“It’s a sure-fire way to send your stock soaring,” said Triple D Trading analyst Dennis Dick, noting the move as “right out of Nvidia’s book.”
Should these gains persist, Broadcom will see an approximate $100 billion increase in its market value. More than 12 brokerages have already raised their price targets for the stock.
Broadcom’s current trading value is about 28 times its expected earnings, in comparison to a price-to-earnings ratio of around 40 for both Nvidia and rival Marvell Technology.
On Wednesday, the company raised its forecast for annual revenue from AI-related chips to $11 billion, up from $10 billion, and also increased its annual revenue and core profit projections.
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Broadcom revealed plans to develop the next generation of custom AI chips for “hyperscaler” clients, widely believed to be Alphabet’s Google and Meta Platforms. In March, the company announced it had added a third custom AI chip customer.
“We continue to see Broadcom as incredibly well-positioned to benefit from rising generative AI investment in the long term,” noted Morningstar analysts.
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Additionally, Broadcom’s software division gained from its acquisition of VMware, contributing $2.7 billion to its second-quarter revenue.
“After this stunning earnings report and a 10-for-1 stock split announcement, if you don’t hold Broadcom, you have a hole in your portfolio,” said Paul Marino, chief revenue officer of GraniteShares, which includes Broadcom stock in its ETFs.
