Broadcom exec: ‘AI at an inflection point’

“AI is at an inflection point in our industry that will change our lives and the way we work,” Charlie Kawwas, president of Broadcom’s semiconductor solutions group, said in a statement.

“At Broadcom, we are … pioneering breakthroughs in networking and connectivity to enable open, scalable and power efficient AI infrastructure,” he added.

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Broadcom has seen a surge in demand for its specialized networking chips, which play a key role in the development of AI systems.

The company also makes ASIC chips, which help hyperscalers — the large providers of cloud services and infrastructure — like Amazon and Alphabet’s Google — move large amounts of data through integrated circuits and ultimately accelerate the speed and reliability with which they process information.

Broadcom shares are up nearly 60% year-to-date and have more  than doubled (up 111%) from a year ago.

Last month, Broadcom beat Wall Street’s expectations for third-quarter earnings and revenue, but the stock slumped after the company issued a muted near-term revenue forecast.

Hock Tan, president and CEO, told analysts that “AI revenue continues to grow and grow strongly.”

Last year, Broadcom completed its $61 billion acquisition of cloud software company VMware. Tan said that “the transformation of the business model of VMware continues to progress very well.”

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“We booked more than 15 million [central processing unit] cores of VCF, representing over 80% of the total VMware products we booked during the quarter,” he said. “And this translates into an annualized booking value of $2.5 billion during Q3, up 32% from the preceding quarter.”

Meanwhile, Tan added, “we continue to drive down costs in VMware. We brought VMware spending down to $1.3 million in Q3 from $1.6 million in Q2.”

Asked about additional acquisitions, Tan said that “right now, I’m having my hands really full and enjoying myself doing it, on really turning, transforming the business model of VMware.”

“I’m very focused on getting VMware as it continues to accelerate in getting private cloud deployed in the largest enterprises in the world,” he said.. “And you know what, it might be another year, two years to go to make that transformation totally complete.”

TheStreet Pro’s Chris Versace was impressed with Broadcom’s results and added the company to his bullpen on Sept. 6.

Analyst says ‘Broadcom is a favorite in AI’

“One of our methods is to pay close attention to competitors, customers, and suppliers for our holdings and given its end-market mix, and Broadcom certainly falls into that basket.,” he said.

Versace said that “the not-so-good news is that like other companies we’ve seen report in recent weeks, Broadcom’s revenue guidance of $14 billion for the current quarter came up short of the $14.11 billion consensus.”

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“In our view, seeing a stock trade off hard on such a tiny shortfall is a symptom of the market we’re in,” he said.

Analysts have been updating their price targets for Broadcom recently.

Cantor Fitzgerald declared that “Broadcom is a favorite in AI.” The investment firm raised its price target on Broadcom to $225 from $200 while maintaining an overweight rating on the shares into Q3 earnings season, according to The Fly

Truist raised the firm’s price target on Broadcom to $205 from $204 while affirming a buy rating on the shares.

The firm said that it was updating its model with reduced interest expense after the company issued $5 billion of bonds with maturities ranging from 2028 to 2034 and coupons ranging from 4.15% to 4.8%, the firm said.

On Oct. 2, Broadcom said it had issued those senior notes. The proceeds will go to general purposes, including paying down existing debt.

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