Broadcom stock was up 1% in morning trading Tuesday. It has suffered an 18% drop for the three trading sessions through to Monday's close, its worst such stretch since March 2020, according to Dow Jones Market Data, following poorly received earnings last week.
But that's not putting off J.P. Morgan analyst Harlan Sur. He has an Overweight rating and $475 target price on the stock.
"[Broadcom] stock remains our overall top pick in semiconductors," wrote Sur, in a research note Tuesday.
Broadcom's custom artificial-intelligence chip business, as well as its networking business, put it in line for AI revenue in the range of $55 billion to $60 billion in fiscal year 2026, rising to more than $100 billion in fiscal 2027, according to Sur. That's up from around $20 billion in fiscal 2025.
While the debate about whether Broadcom-designed chips -- such as Google's Tensor Processing Units -- can take significant market share from AI processor leader Nvidia rages, Sur sees space for both companies to benefit alongside smaller peer Marvell Technology. J.P. Morgan estimates high-end custom chips are currently a $30 billion-a-year market, growing at a compound annual growth rate of between 40% and 45%.
"We believe Broadcom (#1 market share leader) and Marvell (#2 market share leader) will be the biggest beneficiaries of this resurgence in custom chip design," Sur wrote.
Broadcom stock has been hit partly due to confusion over its arrangement with ChatGPT-developer OpenAI. The companies previously announced a partnership to deploy 10 gigawatts of AI computing capacity powered by custom chips but Broadcom didn't publicly identify OpenAI as one of its major customers in its earnings report.
That doesn't bother Sur, who still backs the OpenAI deal to ramp up from 2027 onward with revenue of up to $25 billion per gigawatt for Broadcom. He also expects other technology companies to keep spending heavily on AI infrastructure.
"We remain of the view that it is still early-innings for this AI infrastructure investment cycle, with trillions of dollars of additional investment in the cards for the next several years," Sur wrote.
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