Broadcom has solidified its position as a major player in the artificial intelligence landscape, evidenced by its surge into the trillion-dollar market capitalization club in late 2024. This milestone, achieved on December 13, 2024, underscores the company's successful pivot towards AI-driven growth, fueled by increasing demand for its custom AI chips from major cloud companies. As of June 6, 2025, while the stock has experienced some fluctuations, analysts remain optimistic about Broadcom's future, emphasizing the continued strength of its AI business.
The company's financial performance reflects its growing prowess in the AI sector. In fiscal year 2024, Broadcom reported $12.2 billion in AI revenue, a figure that more than tripled over the year. CEO Hock Tan has projected an ambitious $60 billion to $90 billion revenue opportunity in AI by 2027, signifying a substantial increase from the current market size. This projection has instilled investor confidence, as it highlights Broadcom's potential to capture a significant share of the expanding AI chip market. Major hyperscalers like Microsoft and Alphabet are already partnering with Broadcom, further enhancing the company's credibility and market reach.
Despite the overall positive outlook, Broadcom's stock performance has seen some recent volatility. On June 6, 2025, the stock experienced a drop, which some analysts attribute to high investor expectations and profit-taking after a significant rally. Nevertheless, the underlying strength of Broadcom's AI business remains a key driver for its valuation. Citi analysts, for example, raised Broadcom's stock price target to $285, citing the expected growth in the AI sector as a primary factor. This target reflects the broader analyst range of $201-$325, with Broadcom currently trading near its 52-week high.
Broadcom's strategic advancements in AI technology are also contributing to its optimistic outlook. The company anticipates its AI business to grow 60% year-over-year in fiscal years 2025 and 2026, driven by increasing AI adoption across various industries. Broadcom's AI revenue is expected to reach $5.1 billion in the July quarter, representing a 16% quarter-over-quarter growth. The launch of Tomahawk 6, which enables large-scale AI clusters, is another example of Broadcom's commitment to innovation in the AI space.
However, Broadcom faces some challenges. Concerns have been raised about lower margins due to a higher semiconductor mix and increased options expenses. The company's gross margins were guided lower, with the semiconductor mix representing 56% of fiscal second-quarter 2025 sales. Additionally, there is increasing competition in the AI chip market, with other major players vying for market share.
Despite these challenges, analysts are generally positive about Broadcom's prospects. Melius Research analysts have urged investors to "stay the course," emphasizing that AI revenue metrics are improving. Bernstein analysts highlighted Broadcom's suggestion that its AI sales will surge to about $30 billion next year, which "far more than offsets" weakness in the company's traditional semiconductor business.
In conclusion, Broadcom's strategic focus on AI, coupled with strong financial performance and innovative technological advancements, makes it a compelling stock to consider. While recent stock fluctuations highlight the importance of managing expectations and being aware of market dynamics, the company's long-term growth potential in the AI sector remains significant.
