TLDR
- Broadcom stock rose 1.3% after announcing VMware Cloud Foundation 9.0 will include AI-native capabilities as standard
- Nine of the top 10 Fortune 500 companies have committed to VMware Cloud Foundation platform
- Citi Research maintained Buy rating with $315 target price, citing strong AI growth prospects
- Company expects three major customers to scale to one million AI accelerator clusters by 2027
- Broadcom set to report Q3 earnings September 4 with expected revenue above $15.8 billion estimate
Broadcom stock climbed 1.3% Tuesday morning as the semiconductor giant unveiled major updates to its VMware platform. The company announced that VMware Private AI Services will become a standard component of VMware Cloud Foundation 9.0.
The move makes the entire platform AI-native from the ground up. VCF 9.0 is now available to customers worldwide.
Nine of the top 10 Fortune 500 companies have already committed to using the platform. Customers have licensed more than 100 million cores globally.
The AI services package includes several key capabilities. These cover GPU Monitoring, Model Store, Model Runtime, and Agent Builder functions.
Vector Database and Data Indexing features round out the offering. VMware Private AI Services entitlement will be available in Broadcom’s first quarter of fiscal 2026.
Broadcom is also developing Intelligent Assist for VCF. This AI-driven support assistant is currently in technical preview phase.
The company announced strategic partnerships to support the AI push. A deal with NVIDIA will support Blackwell accelerated computing infrastructure.
Strategic Partnerships Drive AI Expansion
An AMD partnership will support enterprise AI infrastructure. This includes AMD ROCm Enterprise AI software and AMD Instinct MI350 Series GPUs.
“With VMware Cloud Foundation, infrastructure and cloud operators get the cost and operational benefits of virtualization for AI workloads without sacrificing performance,” said Krish Prasad. He serves as senior vice president and general manager of VMware Cloud Foundation Division.
Broadcom also introduced VMware Cloud Foundation Advanced Cyber Compliance. This new service targets security enhancement for private cloud environments in regulated industries.
The company made VMware Tanzu Data Intelligence available. This data lakehouse platform supports analytics, applications, and AI development.
Analyst Support Remains Strong
Citi Research reinforced its positive outlook on Broadcom stock. The firm maintained a Buy rating with a $315 target price.
The stock traded at $297.45, up 1.1% during Tuesday’s session. Broadcom will report fiscal third-quarter earnings after market close on September 4.
Citi expects sales to exceed its $15.8 billion estimate. This would represent a 6% sequential gain from the previous quarter.
The bank anticipates fourth-quarter guidance will also top its $17 billion projection. Higher capital spending plans at Meta Platform, Microsoft, and Alphabet support this view.
Broadcom is deepening ties with major tech companies. Meta, Google, and ByteDance represent key customer relationships.
Management expects each of these three customers to scale to one million AI accelerator clusters by 2027. Broadcom has previously disclosed these business relationships.
Citi identified four additional prospects in Broadcom’s pipeline. These include OpenAI, xAI, and Apple as potential major customers.
Based on these relationships, the bank projects AI sales will surge 60% to $19.5 billion in fiscal 2025. Another 37% increase to $26.7 billion is expected the following year.
The bank noted concerns about margin pressure from AI revenue. However, analysts believe improvements in other business areas could offset this impact.
Citi sees upside potential in Broadcom’s wireless segment. iPhone sales have performed better than expected recently.
The company’s non-AI semiconductor business is positioned for recovery. Revenue peaked at $6.5 billion in January 2023 but has stabilized around $4 billion over recent quarters.
Wall Street maintains strong support for Broadcom shares. Among 45 analysts tracked by FactSet, 42 rate the stock as Buy or equivalent.
Just three analysts rate Broadcom at Hold. No analysts currently recommend selling the stock.
