Broadcom (AVGO) shares edged lower on Monday, slipping 1.6% to $418.45 in midday trading, even as UBS became the latest Wall Street firm to raise its price target on the chipmaker ahead of its highly anticipated fiscal second-quarter earnings report scheduled for June 3. The stock, which has rallied nearly 30% year-to-date after a sharp early-year dip, now carries a market capitalization of approximately $2.03 trillion.
UBS analyst Timothy Arcuri boosted his price target to $490 from $475, maintaining a buy rating, according to reports from TipRanks and Investing.com. This follows similar upgrades from Wells Fargo and TD Cowen last week, underscoring the intense focus on Broadcom's custom AI chip business as a key driver of future growth.
Investors are keenly watching whether the company's AI semiconductor revenue can sustain the stock's recent rally. Broadcom has guided for second-quarter revenue of roughly $22 billion, a 47% year-over-year increase, with $10.7 billion expected to come from its AI semiconductor segment. CEO Hock Tan told investors on the first-quarter earnings call that "our AI revenue growth is accelerating," setting a bullish tone for the upcoming report.
Wells Fargo analyst Aaron Rakers raised his target to $545 from $430, maintaining an overweight rating. His model links AI chip demand to data-center power consumption and suggests AI semiconductor revenue could track 30% to 40% ahead of earlier consensus estimates. TD Cowen's Joshua Buchalter also increased his target to $500 from $405, keeping a buy rating and citing strong demand for tensor processing units (TPUs) and networking hardware.
Broadcom's custom AI chip business has been bolstered by several major deals. In April, the company agreed to build Google's custom AI chips through 2031. Additionally, Anthropic is set to receive about 3.5 gigawatts of AI compute power on Google silicon starting in 2027. Meta has also extended its custom chip supply pact with Broadcom to 2029, covering multiple chip generations.
The competitive landscape remains fluid. Nvidia continues to dominate the AI chip market, with AMD and Marvell also vying for data-center spending. Last week, analysts raised price targets for Nvidia, AMD, and Broadcom as AI chip stocks hover near record levels. However, on Monday, all four names traded lower, reflecting some profit-taking ahead of the earnings season.
Beyond semiconductors, Broadcom is integrating its VMware software into the AI narrative. On May 5, the company launched VMware Cloud Foundation 9.1, a private-cloud platform designed for production AI workloads. The platform supports hardware from AMD, Intel, and Nvidia. Krish Prasad, a senior vice president at Broadcom, said the product targets data privacy, infrastructure cost reduction, and agentic AI—software that operates with minimal human intervention.
Despite the optimism, valuation remains a concern. According to a Motley Fool analysis, Broadcom trades at 86 times trailing earnings and 39 times forward earnings. Bank of America analysts have flagged risks including the chip cycle, customer concentration with Apple and Google, competition, and approximately $60 billion in net debt. The market is not questioning Broadcom's AI credentials, but rather how much of that story is already priced into the shares ahead of the June 3 report.
