Broadcom (AVGO) Valuation Spotlight as OpenAI Alliance Accelerates AI Hardware Growth

Broadcom’s recently announced tie-up with OpenAI to develop and deploy 10 gigawatts of custom AI accelerators has the industry buzzing. This move puts Broadcom (AVGO) squarely at the center of the next wave of AI infrastructure growth.

See our latest analysis for Broadcom.

Riding a wave of momentum from the OpenAI partnership, Broadcom’s stock has surged, notching a 23% share price return in the last three months and delivering a remarkable 96% total shareholder return over the past year. Recent product launches for high-end Ethernet and AI networking, along with strategic collaborations in cloud infrastructure, have all contributed to strong investor enthusiasm. This reinforces the company’s reputation as a leader in advanced semiconductor technology.

If the AI infrastructure boom has your attention, this could be the perfect moment to see who else is shaking up the tech space — See the full list for free.

With so much optimism, and a stock that has already soared, investors are left to wonder if Broadcom’s explosive growth is baked into its current valuation, or if another round of upside could be on the horizon.

Most Popular Narrative: 9.7% Undervalued

With Broadcom’s fair value estimate landing at $386.68 and the last close at $349.33, the narrative points to further upside from today’s price, even after its recent run. This sets the stage for a deeper look at the assumptions driving the consensus fair value.

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, indicating robust multi-year revenue growth in the AI semiconductor segment.

Read the complete narrative.

Curious about what’s powering this bullish view? The narrative’s bold upside is built on expansion in AI hardware, a surging backlog, and aggressive multi-year financial forecasts. Find out which make-or-break numbers analysts believe will fuel Broadcom’s next chapter.

Result: Fair Value of $386.68 (UNDERVALUED)

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

However, ongoing competition and the heavy reliance on a handful of major AI customers could quickly challenge Broadcom's current trajectory if there are shifts in industry dynamics.

Find out about the key risks to this Broadcom narrative.

Another View: Sizing Up the Market Ratios

While the narrative points to Broadcom being undervalued, market-based ratios tell a more cautious story. The company trades at 87.7 times earnings, well above the industry average of 35.9 and a calculated fair ratio of 62.3. That significant gap could signal valuation risk if market momentum slows. Is the optimism already priced in?

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

Build Your Own Broadcom Narrative

Want to dig deeper or form your own perspective? With all the data at your fingertips, it just takes a few minutes to craft your own view. 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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