TLDR
- Broadcom stock jumped nearly 10% after announcing a $10 billion AI chip partnership with OpenAI in October 2025.
- Q3 revenue reached $15.95 billion with AI semiconductor sales hitting $5.2 billion, up 63% year-over-year.
- The company projects a $20 billion AI revenue run-rate for FY25 with $27.5 billion in remaining performance obligations.
- Wall Street maintains 27 Buy ratings with price targets ranging from $372 to $460, representing up to 35% upside.
- Broadcom generated $7 billion in quarterly free cash flow while trading at 80x forward P/E.
Broadcom stock has delivered returns of 50-70% in 2025, reaching approximately $345 per share by late October. The semiconductor company’s AI-focused strategy is driving the rally.
The October 13 announcement of a 10-gigawatt AI chip collaboration with OpenAI sent shares up nearly 10% in one day. The partnership, valued at over $10 billion, centers on custom accelerators for AI workloads.
Broadcom followed up by unveiling “Thor Ultra,” an 800G Ethernet networking chip for AI data centers. The consecutive announcements strengthened the company’s position in AI infrastructure.
Q3 FY25 results showed revenue of $15.95 billion, up 22% year-over-year. AI semiconductor revenue alone reached $5.2 billion, marking 63% growth.
CEO Hock Tan cited “strong and accelerating” AI demand when raising Q4 revenue guidance to $17.4 billion. That represents 24% growth compared to last year.
The company expects its FY25 AI revenue run-rate to approach $20 billion. Q4 AI semiconductor revenue is projected at $6.2 billion.
Strong Backlog Supports Growth Outlook
Broadcom disclosed remaining performance obligations of $27.5 billion. Roughly 34% of that backlog will be recognized within 12 months.
The company generated $7 billion in free cash flow during Q3. That’s a 44% margin relative to revenue.
This cash generation supports continued investment in AI infrastructure while maintaining dividends. Broadcom’s market cap now stands at $1.6 trillion.
Unlike pure chipmakers, Broadcom’s VMware software division contributes 42% of revenue. This diversification provides stability beyond semiconductor cycles.
Wall Street Upgrades Price Targets
Nearly 90% of analysts rate Broadcom as Buy or Overweight. The consensus includes 27 Buy ratings, two Holds, and zero Sells.
JPMorgan set a $400 price target while Piper Sandler moved to $375. Macquarie initiated coverage at $420.
KeyCorp and Barclays issued the highest targets at $460 and $450 respectively. These imply 30%+ upside from current levels.
The consensus target sits around $372, suggesting 7% upside. Wells Fargo’s most conservative target of $345 represents minimal downside risk.
Analysts call Broadcom the “king of AI custom chips.” The focus on inference computing rather than just training sets it apart.
Valuation Reflects Premium Growth Expectations
Broadcom trades at 80x forward P/E versus the sector average of 30x. The premium reflects expected AI-driven growth.
The forward PEG ratio of 1.71 sits 5.5% below the sector median. This suggests growth rates may justify the multiple.
Consensus forecasts point to 30-40% annual EPS growth over the next several years. Even with a flat multiple, that implies 25%+ upside.
Some analysts caution that expectations are already elevated. A CISPE antitrust complaint over VMware and U.S.-China tensions add uncertainty.
OpenAI CEO Sam Altman called partnering with Broadcom “a critical step in building the infrastructure needed to unlock AI’s potential.” The collaboration positions Broadcom as a key player in AI infrastructure buildout across major tech companies.
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