Broadcom (AVGO): Valuation in Focus After $10B OpenAI Partnership and AI Hardware Momentum

Broadcom, riding a wave of investor enthusiasm, saw its stock jump after announcing a $10 billion partnership with OpenAI to build custom AI accelerators. This major deal signals increasing confidence in Broadcom’s evolving role within the fast-expanding AI hardware market.

See our latest analysis for Broadcom.

Broadcom’s share price has rocketed nearly 53% so far this year, with the latest 10% jump sparked by the OpenAI deal and record-breaking growth in its AI chip segment. Add to this robust product launches such as its 800G networking chip and Wi-Fi 8 solutions, along with a string of high-profile collaborations, and it’s clear the company’s momentum is building. This is reflected in a standout 107% total shareholder return over the past year and an eye-popping 688% over three years.

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With shares surging and analyst targets climbing, the real question for investors is whether Broadcom’s stunning growth still leaves room for upside or if today’s price already reflects all that future potential.

Most Popular Narrative: 8% Undervalued

Compared to the last close price of $354.13, the most followed narrative suggests Broadcom's fair value sits higher and captures market excitement. This sets the stage for a revealing insight into the drivers behind this bullish outlook.

Broadcom is experiencing accelerating demand for custom AI accelerators (XPUs) from hyperscale and large language model customers, underscored by the addition of a major fourth customer and a strengthened backlog. This indicates robust multi-year revenue growth in the AI semiconductor segment.

Read the complete narrative.

What is behind this compelling appraisal? Dive in to discover the explosive growth assumptions, aggressive margin projections, and bold profit expectations powering the narrative’s fair value. Are these forecasts too ambitious, or just the beginning? Find out which bets drive the story.

Result: Fair Value of $386.68 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, competitive threats and overreliance on a handful of major AI customers could quickly challenge Broadcom’s compelling growth story if conditions shift.

Find out about the key risks to this Broadcom narrative.

Another View: What Do Earnings Multiples Say?

Taking a different approach, compare Broadcom's price-to-earnings ratio with the market. At 88.9x, its ratio is meaningfully higher than both industry peers (61.8x) and the US Semiconductor average (39.5x). The market's fair ratio could be closer to 62.4x, which suggests current pricing may carry extra risk. Could this premium signal confidence, or is it setting up for a reset?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Broadcom Narrative

If you see things differently or want to dig into the numbers on your own, you can craft your own Broadcom narrative in under three minutes: Do it your way.

A great starting point for your Broadcom research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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