Broadcom Inc. (NASDAQ:AVGO) has been identified as a leading player in the AI custom silicon market, according to a recent analysis from Mizuho Securities. On October 6, analyst Vijay Rakesh reaffirmed an Outperform rating on the company, setting a price target of $410.00. Mizuho’s assessment highlights the potential for Broadcom’s continued growth in the rapidly expanding AI sector.
Mizuho’s report emphasizes that Broadcom is well-positioned to capitalize on the increasing demand for AI technology. The firm points to a significant $10 billion agreement with what is believed to be its fourth AI customer, OpenAI. This partnership is expected to generate substantial revenue from AI racks, with costs for non-ASIC and networking components managed in a way that avoids “margin stacking.”
Growth Projections and Investor Insights
The analysis suggests that Broadcom will experience minimal earnings dilution from potential gross margin impacts. Mizuho estimates that the company will see a reduction of 166 basis points in fiscal 2026, followed by 224 basis points in fiscal 2027, and 286 basis points in fiscal 2028. These changes are projected to result in a modest EPS impact of only 3-4%.
Mizuho also anticipates that the ramp-up of OpenAI’s Titan will gain momentum in fiscal years 2027 and 2028. This acceleration is attributed to the majority of the XPU team’s background in Tensor Processing Units (TPU). Additionally, the strategy of outsourcing racks to contract manufacturers and original design manufacturers is expected to provide further operational leverage.
Broadcom’s Strategic Positioning
Broadcom’s distinctive position in the AI landscape stems from its advanced custom chip offerings and robust networking assets. Mizuho has referred to the company as the “King of AI Custom Silicon,” noting the accelerating revenues from Application-Specific Integrated Circuits (ASICs) and the expanding nature of its engagements within the sector. The firm encourages investors to consider purchasing the stock, particularly following its recent pullback.
While acknowledging the risks associated with investing in AVGO, Mizuho expresses confidence in the potential for high returns from select AI stocks. The firm suggests that some alternatives may offer even greater upside potential, highlighting the evolving nature of the AI investment landscape.
Broadcom’s role in the AI revolution showcases its capabilities in delivering cutting-edge technology solutions. As the demand for AI continues to grow, the company’s strategic initiatives position it favorably for future success.
