What Happened: Shares of fabless chip and software maker Broadcom (NASDAQ:AVGO) jumped 5.7% in the afternoon session after Goldman Sachs analyst Toshiya Hari reiterated a Buy rating and assigned a price target of $1325. The price target implied a potential 10% upside from where shares traded when the rating was reinstated. The optimistic outlook was driven by anticipated robust growth in Broadcom's AI-related businesses, especially in high-speed networking and custom compute segments. The analyst expected a cyclical recovery in Broadcom's Semiconductor business and highlighted the potential for operating margin expansion, given potential synergies from the VMware (NYSE:VMW) acquisition.
Separately, stocks rallied as the S&P 500 index reached an all-time high, gaining 1.1%. The tech-focused Nasdaq index also gained 1.5% as we head into a new earnings season, with early indicators pointing to a potential turning point for semiconductor stocks after the challenges in 2023.
On January 18, 2024, semiconductor giant Taiwan Semiconductor Manufacturing kicked off the new earnings season, reporting strong Q4'2023 results that exceeded Wall Street's revenue and EPS expectations.
During TSMC's earning call, CEO C.C. Wei added, "2023 was a challenging year for the global semiconductor industry, but we also witnessed the rising emergence of generative AI-related applications, which TSMC as a key enabler." Looking ahead, the company expects revenue to grow in the low-to-mid 20% range in 2024, supported by "strong demand for nanometer technologies and robust AI-related demand."
Is now the time to buy Broadcom? Find out by reading the original article on StockStory.
What is the market telling us: Broadcom's shares are somewhat volatile and over the last year have had 7 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago, when the stock gained 8.5% as the company's stock enjoyed bullish sentiments from Wall Street analysts who expect huge potential in the artificial intelligence market. KeyBanc Capital Markets' John Vinh expects Broadcom to benefit in the near-term from its generative AI capabilities--specifically, its TPU product. JPMorgan's Harlan Sur echoed this and praised Broadcom's custom-chip business, which he said is "gaining traction with Google (NASDAQ:GOOGL) for its cutting-edge AI processor chip, TPU."
Broadcom is up 11.5% since the beginning of the year. Investors who bought $1,000 worth of Broadcom's shares 5 years ago would now be looking at an investment worth $4,686.