Broadcom Shares Maintain Upward Momentum on AI Infrastructure Demand

Broadcom US11135F1012

Wall Street's confidence in Broadcom continues to strengthen following the company's record-breaking financial performance. The semiconductor giant is riding a powerful wave of investment in artificial intelligence infrastructure, a trend that has prompted several major investment banks to significantly raise their price targets for the stock. Some analysts now see the potential for shares to reach $480, representing an approximate 39% upside from recent levels. A substantial $73 billion backlog of orders provides a clear visibility into future revenue streams.

The company's fourth-quarter fiscal 2025 results highlighted its accelerating growth. Revenue surged 28% to $18.02 billion, comfortably surpassing analyst expectations of $17.46 billion. Earnings per share came in at $1.95, beating forecasts by eight cents.

Looking ahead, management has provided guidance for the first quarter of fiscal 2026, projecting revenue of approximately $19.1 billion. This would mark another 28% year-over-year increase. A standout figure within this outlook is the forecast for AI chip revenue, which is expected to double to $8.2 billion. This growth is primarily fueled by sales of custom AI accelerators and Ethernet switching solutions designed for AI data centers.

Analyst Consensus Overwhelmingly Bullish

In response to these robust results and guidance, a wave of analyst upgrades has swept through the market. Citigroup reaffirmed its Buy rating and lifted its price target to $480. JPMorgan Chase, UBS, and Sanford C. Bernstein set their targets at $475. The consensus average price target across analysts now stands at $436, implying a 26% gain from current trading levels.

The overall sentiment from the analyst community is decidedly positive. Of 33 published ratings, 29 are either "Buy" or "Strong Buy." Only a single "Hold" recommendation counters this prevailing optimism.

Unprecedented Backlog and Market Dominance

Broadcom's strategic position is reinforced by an AI-related order backlog valued at $73 billion. This provides exceptional visibility and planning security for the next 18 to 24 months. The company commands an estimated 80% market share in high-speed Ethernet chips for data centers. Its Tomahawk 6 and Jericho 3 products are considered industry standards, enabling critical data transfer between GPUs within large-scale AI clusters.

In the market for custom AI chips, Broadcom's dominance is even more pronounced, with a share between 70% and 80%. Its key clientele includes five major technology firms: Alphabet (for Google TPUs), Meta Platforms, ByteDance, OpenAI, and Anthropic. Industry reports suggest potential future partnerships with other leaders such as Apple, Arm Holdings, and xAI could further expand this footprint.

Dividend Growth and Financial Strength

Demonstrating confidence in its sustained cash generation, Broadcom's board of directors approved a 10% increase in the quarterly dividend to $0.65 per share. This raises the annualized payout to $2.60 and marks the fifteenth consecutive annual dividend increase since 2011.

The company's financial metrics remain strong. It achieved an EBITDA margin of 68% for the last fiscal year, and free cash flow for fiscal 2025 totaled $26.9 billion. However, the stock's valuation is demanding, with a forward price-to-earnings ratio of approximately 28. Some analysts caution about potential margin risks and increasing competitive pressures. Additionally, pricing changes for VMware subscriptions have generated some dissatisfaction among enterprise customers.

A Note on Insider Activity

Despite the overwhelmingly positive analyst outlook, recent stock sales by CEO Hock Tan have drawn attention. He recently divested shares worth approximately $34.6 million. While such transactions are often executed for tax planning or portfolio diversification purposes, they can exert short-term pressure on market sentiment.

With its formidable order backlog and leading position in AI networking, Broadcom appears strategically positioned to continue capitalizing on the global infrastructure build-out for artificial intelligence in the coming quarters.