On Monday, Mizuho Securities adjusted its outlook for Broadcom Limited (NASDAQ:), raising its price target to $220 from the previous $190 while maintaining an Outperform rating. The upward revision reflects the potential revenue from Broadcom’s involvement with OpenAI’s custom AI chips. Analysts at Mizuho see a significant opportunity for Broadcom in the second half of 2025 through 2026, as it is expected to launch a custom AI chip in partnership with OpenAI, leveraging TSMC’s advanced 2/3nm process technology, with a second-generation chip on the horizon for 2026-2027.
According to Mizuho’s analysis, this partnership could unlock a more than $16 billion opportunity for Broadcom, assuming around a 10% market share in search queries and an estimated cost of $0.04 per query. The firm’s evaluation indicates that Broadcom is well-positioned in the accelerator market, ranking second behind Nvidia (NASDAQ:), and is poised to benefit from its robust product offerings that emphasize power efficiency, scalability, and optical engine integration.
Mizuho’s revised revenue and EPS estimates for Broadcom remain at $14.0 billion and $1.37 respectively for the current quarter, matching consensus estimates. However, forecasts for fiscal year 2025 have been increased from $60.5 billion in revenue and $6.11 EPS to $61.3 billion and $6.27 EPS, slightly above consensus. For fiscal year 2026, projections have been raised from $66.8 billion in revenue and $6.86 EPS to $68.6 billion and $7.31 EPS.
The new price target of $220 reflects a 35 times multiple of the anticipated fiscal year 2025 earnings per share, aligning with the expanded multiples seen in the semiconductor sector. Broadcom’s gross margins (GM) and operating margins (OM) are highlighted as industry-leading at 77% and 61% respectively. The optimism also stems from the expected growth in AI revenue, which is projected to increase at a compound annual growth rate (CAGR) of over 70% from fiscal years 2023 to 2026.
InvestingPro Insights
Broadcom’s strong market position and growth potential highlighted by Mizuho Securities are further supported by recent data from InvestingPro. The company’s revenue growth of 32.04% over the last twelve months and a remarkable 47.27% quarterly growth underscore its robust performance, aligning with Mizuho’s positive outlook.
InvestingPro Tips reveal that Broadcom has raised its dividend for 14 consecutive years, demonstrating a commitment to shareholder value that complements its growth strategy. This is particularly noteworthy given the company’s involvement in cutting-edge AI chip development.
The stock’s performance has been exceptional, with a 108.65% total return over the past year, reflecting investor confidence in Broadcom’s strategic direction and growth prospects. This aligns well with Mizuho’s increased price target and the anticipated revenue boost from AI initiatives.
For investors seeking a deeper understanding of Broadcom’s potential, InvestingPro offers 16 additional tips, providing a comprehensive view of the company’s financial health and market position.
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