Oppenheimer Designates Broadcom as a Key Player in AI and Maintains Outperform Rating

Published March 21, 2024

Investment firm Oppenheimer has recently reasserted its Outperform rating for semiconductor giant Broadcom, following the company's disclosure of its breakthrough artificial intelligence (AI) infrastructure technologies. In an investor meeting, Broadcom (NASDAQ:AVGO) highlighted its innovative contributions to the AI sector, propelling their stock to rise by 3% during premarket trading. The rise comes against the backdrop of an already impressive year-to-date (YTD) stock increase of 14%.

Broadcom's Foray into AI Infrastructure

In showcasing its commitment to AI development, Broadcom presented a suite of technologies designed to bolster large-scale AI infrastructure. This includes the Bailly CPO Ethernet switch, Tomahawk 5, the Trident 5-X12 chip incorporating neural networks, and the AI-centric Jericho3-AI fabric. These advancements underline the chipmaker's pivotal role in empowering next-generation AI networks.

Why Oppenheimer Backs Broadcom

Oppenheimer emphasizes Ethernet's critical position as the ubiquitous network standard among cloud providers, and by extension, its adoption by the principal hyperscalers. The brokerage firm projects that Ethernet's open and scalable nature will enable it to capture more market share. Broadcom is currently shipping PCIe5 switches and anticipates the release of PCIe6 samples later within the year.

An AI-optimized Thor2 network interface card (NIC), which is not regarded as 'smart', was amongst the unveiled products. This NIC centers on 400G scalable bandwidth and Remote Direct Memory Access (RDMA), functionalities deemed vital for high-performance AI applications.

Broadcom's announcement of its third custom ASIC (XPU) client, identified as a large-scale consumer internet enterprise, underscores the company's significant market footprint. With an AI sales forecast exceeding $10 billion in the current year, representing 35% of the semiconductor segment and 20% of overall sales, this partnership is reflective of the strategic inroads Broadcom is making within the AI industry.

For Oppenheimer, Broadcom stands out as a core AI company and continues to rank as a top choice in the AI technological domain.

Broadcom's Performance and Market Outlook

While analysts across the board are weighing in, the consensus from Seeking Alpha analysts leans towards a Buy rating for AVGO. This rating aligns fairly well with the overall Wall Street sentiment, which is also inclined towards a Buy, although the SA Quant rating gives it a Hold.

Broadcom, Oppenheimer, AI