Broadcom: AI Investor Day Reinforces Our Belief in Strong Growth and Durable Competitive Position

We maintain our $1,090 per share fair value estimate of wide-moat Broadcom after its artificial intelligence investor day. The event reinforced our positive view of the firm’s road map for AI chips and generally aligned with our long-term thesis. We believe Broadcom is well positioned to provide semiconductors into AI networks, via its traditional network switch chips and its burgeoning custom accelerator design revenue. We believe the latter is the larger opportunity, and Broadcom announced a third custom-chip customer—a positive, in our view, adding to its existing work with Google and Meta. We still anticipate Broadcom’s AI sales to grow in the double digits in the long term and significantly higher over the next two years. However, we see shares as overvalued. We believe that to justify Broadcom’s current valuation, one would have to model durable growth of close to 50% for its AI sales over the next five years, at minimum.