Shares of silicon and software giant Broadcom (AVGO -1.47%) surged as much as 10% on Monday, before settling into a 9.5% gain as of 1:15 p.m. ET.
Monday's rally came after a near-25% surge on Friday, the day after the company reported earnings that contained blowout long-term guidance for the company's artificial intelligence (AI) chip business.
It appears as though Broadcom is now seeing a follow-through rally Monday, helped along by a positive Wall Street analyst note.
BofA still loves Broadcom
On Monday, Bank of America sell-side analyst Vivek Arya named Broadcom as one of his top semiconductor sector picks for 2025, despite the stock's recent rally. Arya wrote today he believes artificial intelligence winners will continue to outperform in the first half of 2025. Then, toward the back half of the year, non-AI related chip sectors currently in a downdraft, like industrial chips, could do better. Overall, Arya sees the semiconductor industry growing at a 15% pace, on top of the 20% gains estimated for 2024.
Broadcom's crown jewel is its AI chip business, but it also makes chips across several end markets. The fact that Arya is still listing Broadcom as a top pick, even after the stock surged by 25% Friday and cleared a $1 trillion market cap, is fueling very high optimism.
On the back of its fourth fiscal quarter earnings in which revenue actually missed expectations, Broadcom CEO Hock Tan said on the conference call with analysts the company expects between $60 billion and $90 billion in AI-related chip revenue in 2027, up from just $12.2 billion in 2024. That appeared to confirm the AI buildout will be longer lasting and larger than some skeptics might have imagined.
Investors scramble to adjust their models
Tan's longer-term guidance likely sent analysts scrambling to update their financial models to account for much higher revenue and earnings-per-share growth over the next three years, which is why Broadcom's stock is surging. As long as Broadcom's results come in line with its new outlook, the move appears justified.
