Wolfe Research Raises Broadcom Price Target to $420

Wolfe Research analyst Chris Caso raised the price target on Broadcom Limited (NASDAQ: AVGO) to $420.00 (from $400.00) while maintaining a Outperform rating.

“AVGO posted upside to JanQ expectations, and guided F2Q revenue to $22.0bn, ~7% above Street. Most important was that the company raised FY27 AI guidance to over $100bn (consensus had been ~$85bn).

One source of upside was OpenAI, which was now converted to a customer with about 1GW of capacity in FY27. Anthropic will also drive 3GW of capacity in FY27, up from 1GW this year.

In total, AVGO expects to supply about 10GW of capacity to 6 customers in FY27.

Also important is that AVGO no longer expects GM dilution from Anthropic.

Management declined to provide color, but we previously speculated that AVGO could use the same mechanism as does NVDA and AMD to keep low margin rack costs from passing through their income statement.

AVGO management was well aware of and addressed the investor concerns heading into the call.

They expect to ship META multiple GW of XPU in FY27, despite Meta’s recent deals with both NVDA and AMD.

They pushed back against Google attempting to do XPUs on their own, and don’t see that happening for many years.

They were comfortable with Mediatek doing a lower performance version of TPU, and that doesn’t appear to be affecting AVGO volume.

They also made the case for why their software business wasn’t susceptible to AI disruption (due to the nature of VMWare, security and mainframe software, we agree).”

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