There are only about a handful of stocks that have a $1 trillion market value. The members include some of the most popular in the market -- Nvidia, Tesla, Apple, and Berkshire Hathaway, just to name a few. Toward the end of the last year, the custom chipmaker Broadcom (AVGO 1.63%) went on a massive run and joined the exclusive club.
However, after the intense sell-off in April due to tariffs and the global trade war, Broadcom fell all the way below a $700 billion market capitalization. After the recent rally that has ensued since mid-April, Broadcom has now rejoined the $1 trillion club (as of May 28).
But one Wall Street analyst thinks the party has only just begun and that shares will soon hit a new all-time high.
Not a competitor, but a complement to Nvidia
While there will be no unseating Nvidia, long considered the king of the more general graphics processing unit (GPU) space, Broadcom has gained traction with its custom chips designed for more specific work loads. For instance, one of Broadcom's core products is its custom application-specific integrated circuit (ASIC), referred to as XPU.
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The XPUs are supposed to be better for inference, which in AI means teaching large language models to leverage real-time data to see patterns and make forecasts that help solve specific tasks. Broadcom works with hyperscalers like Meta Platforms and other key players in the AI sector like OpenAI to develop custom chips for their perspective businesses and AI workloads.
Melius Research analyst Ben Reitzes views custom chips less as a competitor to Nvidia and more as a complement. "Companies dual source compute from both Nvidia and Broadcom for flexibility around different workloads -- but all remain committed to both," Reitzes said in his recent research note. He also raised his price target on Broadcom from $198 per share to $283, implying another 19.4% upside from current levels.
Part of Reitzes' upgrade includes a rerating to value Broadcom at 30 times his projected 2027 earnings instead of a 22 multiple, because the analyst sees a realistic path to 43% compound annual growth in revenue from AI processors over the next decade. Broadcom has also announced new customers for its custom AI chip solutions, potentially increasing its overall market.
"With 7 XPU customers now confirmed, the serviceable addressable market could arguably be increased later in the decade to a range of $140-$210 billion -- with Broadcom garnering well over $70 billion in AI revenue later in the decade given its market share at these 7 customers," Reitzes wrote. He also sees potential tailwinds as Broadcom scales its specialized networking chip business and implements larger-than-expected share repurchases.
Can Broadcom hit new all-time highs?
The shares trade at around 36 times forward earnings, so a 30 multiple is not unrealistic if the company continues to add and retain customers. Broadcom continues to grow at a fast clip. In the first quarter of 2025, the company grew revenue by 25%, while earnings per share increased by over 300%.
Broadcom's customers also include some of the strongest names in the AI sector. Most of these customers are cash cows with massive capital expenditure (capex) plans. While capex may ebb and flow, the race to create the best AI solutions has only just begun and these large players are going to constantly need to innovate. I also think a stock that is working around or in tandem with Nvidia -- and not as a direct competitor -- is a good place to operate because then Broadcom can more or less feed off Nvidia's growth.
Sure, Nvidia will always be the main GPU player, but Broadcom's XPUs can be deployed alongside them and can help AI workloads hone in on specific tasks. For all of these reasons, I would have to agree with Reitzes and assume that a new all-time high for the stock is just a matter of time.
