TD Cowen Reiterates Buy Rating on Broadcom, Bullish on Its AI Revenue Outlook!
TD Cowen has reiterated its Buy rating on Broadcom Inc., with a price target maintained at $500.00. TD Cowen expects investors to focus on whether Broadcom can maintain its multi-year business outlook and provide specific forward-looking commentary to reinforce market confidence.
Broadcom's management reiterated its target of AI semiconductor revenue exceeding $100 billion in fiscal 2027. If the deployment of approximately 10 gigawatts of computing capacity proceeds smoothly, actual revenue could significantly exceed expectations. The company has achieved 32% revenue growth over the past 12 months, with a gross margin as high as 76%, demonstrating strong growth momentum.
TD Cowen remains optimistic about the development trajectory of Google's TPU project, supported by Google's commentary on capital expenditures, but remains cautious about other XPU projects. The firm noted that Meta's MTIA timeline was somewhat delayed last quarter, while the outlook for other projects, such as OpenAI's ASIC chips, also remains uncertain. TD Cowen expects Google's TPU project to demonstrate solid fundamentals and clear business guidance, although MediaTek's market share will continue to create some narrative pressure. Even if MediaTek's TPU project revenue gradually increases, TD Cowen's research continues to support the view that Broadcom's earnings have room for upside.
TD Cowen believes that, given the technological and commercial challenges involved in scaling new computing platforms, as well as Broadcom's long-term agreement with Google, Broadcom has ample reason to maintain its high market share in Google's business and deserves the market's full confidence.
Nvidia announced a partnership with major financial institutions including BlackRock and Goldman Sachs to launch a large-scale computing financing platform, targeting more than $500 billion in funding for AI infrastructure construction. Nvidia may provide backstop support for transactions of up to $125 billion. Meanwhile, Broadcom faces certain challenges, with Bank of America downgrading Broadcom's credit rating to Market Weight, citing uncertainty surrounding its XPV platform in partnership with Blackstone and Apollo. Despite this, Broadcom's revenue and free cash flow are still expected to achieve significant growth from fiscal 2025 through fiscal 2028.
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In addition, Broadcom lost a legal case in the European Union, with the court rejecting its application to suspend the antitrust investigation and obtain U.S. legal documents. The case is related to Broadcom's acquisition of VMware. From a broader perspective, driven by continued growth in AI infrastructure investment, technology giants such as Microsoft and Alphabet are expected to significantly increase capital expenditures in 2027. These developments reflect the broader trend of rapid evolution and continued investment in AI infrastructure across the technology industry.
