Broadcom rises 4% to $430.7 as Citi names it top chip pick before earnings

Broadcom's market value crossed $2 trillion as the custom AI chip designer heads into its June 3 earnings report with Citi calling it the top semiconductor pick for 2026.

Broadcom's custom AI chip business, which doubled revenue to $8.4 billion last quarter, is pulling the company's valuation past the $2 trillion threshold as six of the world's largest tech firms bet on its silicon.

"We have line of sight to achieve AI revenue from chips in excess of $100 billion in 2027," Chief Executive Officer Hock Tan told analysts on the company's March earnings call, adding that Broadcom has secured supply chain capacity through 2028.

Shares rose 4% to $430.70 on May 26, pushing the market capitalization to $2.04 trillion. Citi analyst Atif Malik raised his price target to $500 from $475 on May 12, maintaining a Buy rating and naming Broadcom his top semiconductor pick. The company reports fiscal second-quarter results on June 3, with Wall Street estimating revenue of $22.08 billion, a 47% increase from a year earlier, and adjusted earnings of $2.39 per share, up from $1.58.

Broadcom's shift from a diversified chip conglomerate to an AI infrastructure powerhouse is reshaping its valuation. Malik estimates AI revenue will grow from roughly half of total sales today to about 81% by late fiscal 2028. With analysts projecting revenue to reach $288 billion by fiscal 2030 and adjusted earnings of $31 per share, the stock's 30x forward multiple leaves room for further gains if the company delivers on its AI targets.

The company now counts six major AI customers, up from five a quarter ago, after adding OpenAI to a roster that includes Google and Meta. OpenAI's first custom XPU, or accelerator processing unit, is expected to ship in volume in 2027, offering more than 1 gigawatt of computing capacity. Anthropic is scaling fast too, with demand expected to exceed 3 gigawatts of compute next year.

On the networking side, Broadcom's Tomahawk 6 switch chip, operating at 100 terabits per second, is the only product of its kind on the market. AI networking revenue grew 60% year over year last quarter and is expected to represent 40% of total AI revenue in the current period.

The custom silicon trend is gaining momentum across the industry. Application-specific integrated circuits are expected to grow 45% this year, compared with graphics processing units at 15%, according to industry estimates. Google's Tensor Processing Units, designed in partnership with Broadcom, can reduce computation costs by 62% relative to using Nvidia's general-purpose GPUs, according to research firm Semianalysis.

Broadcom's supply chain advantage adds another layer of insulation. Tan told analysts the company has secured capacity in leading-edge wafers, high-bandwidth memory, and substrates through 2028 — an unusually long visibility window that gives Broadcom a structural edge over rivals still competing for components.

For investors, the question is whether the market has already priced in this trajectory. Broadcom shares have returned 3,500% over the past decade including dividends. At roughly 30x forward earnings, the stock is pricing in the AI revenue ramp but leaves room for upside if the June 3 report shows accelerating momentum in custom chip orders.

This article is for informational purposes only and does not constitute investment advice.