Goldman Sachs Raises Broadcom's Target Price to $500 Amidst Surpassing AI Business Expectations

Goldman Sachs, in its latest report, has raised the 12-month target price for semiconductor giant Broadcom from $480 to $500, while maintaining a buy rating. Analysts pointed out that, thanks to strong capital expenditures from key customers, Broadcom's performance and guidance for the first fiscal quarter are expected to exceed market expectations.

In terms of core financial data, Goldman Sachs adjusted its long-term earnings forecasts for Broadcom, raising the expected earnings per share for the fiscal year 2026 to $10.53, and significantly raising the expected earnings per share for the fiscal year 2027 to $19.49. These adjustments are mainly driven by higher forecasts for AI-related revenue. Goldman Sachs is much more optimistic about Broadcom's AI business prospects than the market consensus. The bank predicts that Broadcom's AI revenue for the fiscal years 2026 and 2027 will be 6% and 16% higher than the market's general expectations, respectively. This gap indicates that Wall Street may have underestimated Broadcom's growth potential in the field of custom AI chips.

From the perspective of the product line, Broadcom's AI semiconductor business is becoming the core growth engine. Goldman Sachs expects Broadcom's AI semiconductor revenue for the fiscal year 2027 to reach $132.564 billion, while the revenue from traditional non-AI semiconductors is expected to be $18.681 billion. Infrastructure software business remains stable, with revenue expected at $31.923 billion for the fiscal year 2027.

For investors, Broadcom's absolute advantage in the custom XPU market and the upgrade of AI network infrastructure are the core benefits. Goldman Sachs pointed out that Broadcom's latest Tomahawk 6 chip is accelerating shipments, which will further consolidate its dominant position in AI-scale networks. The next focus of market attention will be on the upcoming earnings conference call. Investors need to closely track the progress of cooperation with Broadcom's existing and new XPU customers. At the same time, the impact of the surge in custom chip shipments on the company's gross margin trend for fiscal years 2026 and 2027 will also be key to determining the stock price trend.

Despite the optimistic outlook, Goldman Sachs also mentioned the four major core downside risks facing Broadcom. These include the possibility of a slowdown in global AI infrastructure spending. In addition, market share losses in the custom computing field, continued inventory digestion in non-AI business, and fierce competition faced by VMware also require investors to stay vigilant.