Broadcom’s AI Chip Partnership Fuels Bullish Analyst Outlook

Broadcom US11135F1012

While Nvidia has long dominated the AI hardware narrative, Broadcom is increasingly viewed as a formidable contender. Market strategists are pointing to the company's deepening collaboration with Google and its custom AI silicon as a significant catalyst for future growth. A recent analyst upgrade underscores a belief that the market continues to undervalue the potential of this partnership.

Broadcom's operational strength provides a solid foundation for this optimism. For the recently concluded fiscal year 2025, the company's AI segment alone generated $20 billion in revenue, marking a substantial 65% increase year-over-year. Despite these robust results, the stock has undergone a recent correction and currently trades approximately 7% below its 52-week high, which was recorded in mid-January.

Investors are awaiting a key near-term catalyst. The company is scheduled to report earnings for the first quarter of its new fiscal year on March 5, 2026. This release is expected to offer concrete data on whether the growth momentum in the custom chip business is accelerating as anticipated.

Analyst Upgrade and Price Target Rationale

This positive sentiment was formally echoed by Wolfe Research on January 31. Analyst Chris Caso upgraded Broadcom's rating to "Outperform" and established a price target of $400 per share. With the stock trading around $330 at the time, this projection implies notable upside potential.

The core of Caso's bullish thesis centers on the surging demand for Alphabet's Tensor Processing Units (TPUs). These specialized AI accelerators, co-developed by Broadcom, are gaining considerable traction. The analyst forecasts that annual shipments of these units could climb to seven million by 2028.

Competing in a Specialized Niche

The investment case hinges on the strategic competition between Nvidia's general-purpose GPUs and custom-built AI chips known as ASICs. A critical validation point for Broadcom's technology was Google's successful training of its Gemini 3 language model using the jointly developed TPUs. This achievement positions the solution as a credible alternative to Nvidia's industry-standard hardware.

Firms like D.A. Davidson acknowledge Broadcom's leadership in this lucrative niche but also highlight a specific risk: a heavy reliance on its mega-customer, Google. Nevertheless, the prevailing sentiment on Wall Street remains optimistic. This is driven by the growing trend of hyperscalers actively seeking cost-effective alternatives to premium-priced Nvidia solutions, a dynamic that plays directly into Broadcom's strategic strengths.