Wall Street updates Broadcom's valuation due to AI demand. Is the stock still worth buying?

Analysts are revising upward targets on shares of chipmaker Broadcom after the company announced a major new customer and a contract worth more than $10 billion for 2026. The tech giant and does not name the customer, but some experts speculate it could be ChatGPT developer OpenAI. Broadcom's stock is already up nearly 50% this year, but the most optimistic analysts see upside potential of more than a third.

Wall Street is revising estimates for Broadcom shares after the company said it expects revenue growth for its AI division next year to be higher than it forecast a quarter ago. The most optimistic forecast came from analysts at Melius Research, who raised their target on Broadcom shares from $335 to $415, according to AInvest data. The new target assumes growth of quotations by 36% from the closing level of the last trades. According to Melius estimates, after the appearance of a new major client, Broadcom's annual revenue from sales of chips for AI should exceed $ 40 billion (previously expected $ 30 billion), reports Marketwatch.

Following the report's release on Sept. 4, CEO Hock Tan said the chipmaker's revenue will increase in fiscal 2026, which starts in November, due to a major new customer and a chip manufacturing contract worth more than $10 billion.

"Last quarter, a major customer placed production orders with Broadcom," Tan said without disclosing the customer. - "We now expect our FY 2026 AI revenue outlook to be significantly improved from what we indicated last quarter.

Analysts at Mizuho, Cantor Fitzgerald and KeyBanc believe the unnamed customer could be OpenAI. The Financial Times reported the day before, citing sources, that the two companies have jointly developed a chip that will hit the market next year. OpenAI declined to comment on this information to CNBC.

Broadcom had previously estimated that its AI chip revenue would grow by about 50-60% in fiscal 2026, the same as the current year. Now, however, with the addition of a new customer, which Tan said has "urgent and very significant demand," the growth rate will accelerate and prove to be "quite significant," Bloomberg reports.

Analysts at Mizuho raised their estimate for Broadcom's AI division revenue growth next year to 76% from a previously expected 60%, which would boost total annual AI revenue to $35 billion, CNBC writes.

Analysts surveyed by LSEG expect the company's total revenue for the year ending October 2026 to grow about 30 percent to $81.8 billion, up from $63.1 billion in the current fiscal year.

- Mizuho raised its target price on Broadcom shares from $320 to $355, maintaining its Outperform rating. The new target implies a 16% growth of quotations from the closing price of previous trades. Mizuho emphasizes that Broadcom remains "the clear leader in custom AI ASIC chips and data center networking solutions."

- Analysts at Piper Sandler raised their target price on the chipmaker's shares to $375 from $315, maintaining their "Outperform" rating, Investing.com reports. In addition to the new contract and improved outlook, the analysts also noted the resilience of the company's gross margin.

- Truist raised its target on Broadcom shares from $295 to $365, maintaining its recommendation to buy them, TipRanks writes. The bank's analysts called the chipmaker's quarterly report "low-drama" and highlighted the growth of its AI business, including the company's fourth major customer. As such, Truist raised its fiscal 2026 earnings per share forecast to $10.46 from $9.18.

- TD Cowen Investment Bank raised its target price on the stock from $355 to $370, Investing.com writes. Analysts also highlight strong growth in the AI chip manufacturing segment.

- Analysts at Jefferies raised their target on shares of Broadcom from $315 to $350, according to SeekingAlpha. They maintained a Buy rating, citing strong third-quarter fiscal 2025 results and improving revenue growth prospects in the AI segment.

- KeyBanc Investment Bank raised their target price on the stock from $330 to $400, TipRanks reports. Analyst John Vinh noted the strong third-quarter report and 63% year-over-year revenue growth in the AI division. KeyBanc also expects revenue growth to accelerate in the fourth quarter.

- Barclays raised its target price on the chipmaker's shares from $265 to $400 and maintained an "Above Market" recommendation, AInvest reports. Analysts of the investment bank pointed to the steady growth of profits and high profitability of Broadcom's business.

- The Wall Street consensus price target for the chipmaker's shares, according to MarketWatch, is $337.6, just slightly above the current value. Of the 49 analysts tracking Broadcom securities, 45 advise buying them, three advise holding them in a portfolio, and only one advises selling them.

Following the release of its third-quarter report, Broadcom shares soared 16% momentarily to $356.2 in trading on Sept. 5 before slowing to a 10.5% gain.

Since the beginning of the year, the chipmaker's securities are up 45.8% and 148% in 52 weeks.

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