'Second only to Nvidia': Oppenheimer recommended buying shares of AI boom beneficiary

Oppenheimer predicts Broadcom's stock to rise by at least another 5% and recommends buying the securities, as the chipmaker is "the second most important AI company after Nvidia". Wall Street is optimistically awaiting Broadcom's quarterly report due on September 4. Oppenheimer believes the results and outlook will beat analysts' estimates.

Oppenheimer analyst Rick Schafer raised his target on chipmaker Broadcom from $305 to $325 and reiterated an outperform rating, which equates to a buy recommendation. The new target implies an upside of about 5% from the closing level on August 28.

According to Schaefer, Broadcom remains "the second most important company in AI after Nvidia," thanks to its market leadership in application-specific integrated circuits (ASICs). These processors are ordered by technology companies developing their own cloud services as well as artificial intelligence. ASICs cannot perform a "wide" range of tasks like Nvidia's AI chips, but they also cost less, while providing higher efficiency, speed and adaptation in specific "narrow" tasks of the customer.

Broadcom's market value has jumped by a third since the beginning of the year, helped by growing revenue from AI applications, steady demand for the company's hardware and continued investor interest in the technology sector, CNBC writes.

Schafer expects Broadcom's results for the third quarter of fiscal 2025, which ended in July, as well as its fourth-quarter outlook, to beat Wall Street's expectations.

"Growth continues to be driven by AI areas in computing and networking, which account for more than half of the company's semiconductor business (...) Its management expects tech giants to use its own AI chips [made by Broadcom] to optimize large language models," Schafer wrote in a note cited by CNBC.

According to the analyst, Broadcom's business in networking, wireless solutions, broadband Internet access, servers, data storage and software creates a foundation for sustainable growth and stable payments to shareholders. Schaefer emphasized that the key drivers for Broadcom remain orders from Google, Meta, OpenAI and Apple.

Citi analyst Christopher Danely on August 27 also reiterated a buy recommendation on Broadcom shares and a target price of $315. The investment bank expects the company's revenue for last quarter to exceed its estimate of $15.8 billion, which would mean growth of 6%. And the forecast for the fourth quarter will exceed Citi's estimate of $17 billion thanks to increased capex from Meta, Microsoft and Alphabet, the analyst believes.

UBS and Susquehanna this week also maintained their optimistic ratings for the chipmaker's securities. At the same time, both raised their targets to $345 and $350, respectively.

However, according to MarketWatch, Broadcom's current price target may be close to the ceiling, if the consensus of analysts tracking the company's quotes is to be believed. The average target now stands at $307, and that's 0.5% below Thursday's close. Of the 47 analysts, 43 recommend buying the chipmaker's securities, three advise holding them in a portfolio, and one suggests selling.

This article was AI-translated and verified by a human editor