Broadcom's CEO Has Line of Sight to $100 Billion in AI Chip Revenue. Is the Stock a Buy?

Broadcom (NASDAQ: AVGO) is 1 of the astir invaluable semiconductor companies by marketplace headdress (currently valued astatine $1.5 trillion). It has been a coagulated spot banal to thrust the artificial quality (AI) roar implicit the past fewer years, and CEO Hock Tan conscionable revealed however large its accidental could become.

Last quarter, gross surged 29% twelvemonth implicit twelvemonth to $19.3 billion. Management expects fiscal second-quarter gross to summation 47% twelvemonth implicit twelvemonth to $22 billion.

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However, the large uncover was Tan's updated fiscal 2027 outlook. He said Broadcom has "line of sight" to make implicit $100 cardinal successful gross adjacent year. This is simply a ample concern that supplies customized chips (accelerated processing units, oregon XPUs), networking cogwheel (the components that link chips), and bundle for information centers, but Tan emphasized that this outlook applies lone to AI chips.

Management bases this outlook connected circumstantial signals it is seeing from its customers.

Broadcom benefits from visibility into customers' AI improvement plans and capableness needs. Key customers see Alphabet's Google, Anthropic, Meta Platforms, OpenAI, and 2 different unnamed customers. Google's plans to ramp its next-generation Ironwood spot and OpenAI's program to deploy its archetypal customized spot are 2 circumstantial catalysts that origin into Broadcom's gross outlook.

Another pillar of the company's outlook is the increasing request for Tomahawk 6 switches and different networking products. Management guided for maturation successful AI-related networking gross to accelerate successful fiscal Q2.

The surge successful networking request is significant, arsenic customers typically walk connected these components earlier deploying AI accelerators, specified arsenic Broadcom's XPUs. Demand successful networking fuels much spot demand.

Tan besides bases the 2027 outlook connected Broadcom's proviso chain. It has already locked successful the leading-edge wafers, high-bandwidth memory, and different components it needs to proviso chips to customers done 2028. This mitigates risks astir chipmaking bottlenecks, peculiarly the constricted proviso of memory.

The hazard to ticker is lawsuit attraction and broader information halfway spending cycles. Broadcom is heavy babelike connected request from six cardinal customers. Anything that slows their information halfway build-outs could derail Broadcom's momentum.