Broadcom (AVGO) Initiated as Outperform With $420 Price Target Amid AI Growth

Broadcom Inc. (NASDAQ:AVGO) is one of the AI Stocks You Should Not Ignore. On September 15, Macquarie initiated the stock with an Outperform rating and $420 price target. The firm believes that Broadcom is well positioned for artificial intelligence.

“We believe Broadcom should trade at a premium to industry peers with 1) strong growth outlook, 2) a strong ~34% dividend CAGR [compound annual growth rate] in recent years, and 3) long-term strategic planning supported by a unique management incentive plan”

According to the firm, the growth of ASICs, or application-specific integrated circuits, are outpacing GPUs, or graphics processing units. Moreover, Broadcom currently holds a near-monopoly in AI ASIC and cloud networking solutions, with leading positions in Ethernet switching, routing, and SerDes IP.

“Broadcom’s ASIC technology is growing faster than GPU. We expect surging demand for ASIC to outpace GPU growth, driven by adoption among hyperscalers and vertical AI markets (eg, auto, healthcare, financial services),” Lai said. “We estimate a 72% global AI ASIC market CAGR over 2025–28, with Broadcom capturing > 70% market share.”

Meanwhile, the company’s high-margin software expansion is another encouraging aspect for the stock. The firm noted how the chip maker’s operating profit margin increased to 66% from 62% after its VMware acquisition.

“Its software business enhances long-term margin stability, high-quality free cash flow, and re-rate.”

Broadcom is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets.

While we acknowledge the risk and potential of AVGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVGO and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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