Is Broadcom The Next Nvidia?

Broadcom shares have soared 38 in the two trading days since it reported results, pushing the company's market capitalisation to nearly US1.2-trillion. At the heart of the rally is Broadcom's prediction that the addressable market for AI components it designs for data centre operators will be as big as 90-billion by fiscal 2027. But there's a lot to be done to turn that opportunity into reality.

"This is kind of like the Nvidia moment of maybe a year-and-a-half ago where they blew the number out and everybody had to catch up and chase it," said Ken Mahoney, CEO at Mahoney Asset Management, which owns the stock. Broadcom is showing investors that the demands from AI computing are so big that there's plenty of room for other winners aside from Nvidia, Mahoney said.

Broadcom was having a strong year even before last week's results, with solid growth in its AI business underpinning its performance as one of the top stocks in the Philadelphia Semiconductor Index. Still, it hasn't been a completely smooth ride the shares plunged in September after the company gave a disappointing forecast because of weakness in its non-AI operations.

This quarter's results have turned the focus squarely back to AI. Broadcom shares are now up more than 120 year to date, set for the best annual performance since their 2009 listing. Analysts have been scrambling to keep up, with multiple Wall Street firms hiking price targets and estimates following the earnings. Still, even a 19 jump in the average analyst target since the results has failed to keep pace with the shares.

Estimates for Broadcom's net earnings per share for fiscal 2025 have risen 12 in the past week.