Broadcom Emerges as a Powerhouse in the Custom AI Chip Arena

While much of the market’s attention has been focused on Nvidia’s dominance in the AI chip sector, a formidable competitor is making waves with a surge in demand for its custom-designed AI accelerators. Broadcom’s trajectory in this high-growth market is exceeding even the most optimistic analyst forecasts, positioning the semiconductor giant for what experts predict will be an explosive growth phase.

Wall Street’s Bullish Stance

The investment case for Broadcom has strengthened significantly, prompting Jefferies to elevate the stock to its top pick status. The firm’s analysts have set a price target of $480, asserting that the market is still substantially underestimating the company’s potential. This newfound optimism is rooted in concrete financial projections and major customer engagements that signal a multi-year growth story.

The Google Partnership: A Multi-Billion Dollar Engine

The scale of the opportunity becomes clear when examining the data from key partners. Since April 2025, Google’s token processing capacity has experienced a near-tripling, escalating from 480 trillion to 1,300 trillion tokens per month. This massive increase in computational demand directly translates into a need for significantly more hardware, a gap that Broadcom is uniquely positioned to fill.

According to Jefferies analyst Blayne Curtis, orders for Google’s Tensor Processing Units (TPUs) are projected to surge from 1.5 million units in 2025 to approximately 3 million units by 2026. Google, however, is no longer the sole anchor customer. AI research company Anthropic has already secured a $10 billion deal, beginning with an initial order for 250,000 units and with subsequent purchases in the pipeline. Furthermore, a new cluster featuring up to 1 million TPUs for Anthropic is anticipated to become operational in 2026.

Soaring Revenue and Profit Projections

Jefferies has responded to these developments with dramatic upward revisions to its financial models. The firm now forecasts revenue of $100 billion for 2026 and $130 billion for 2027, figures that sit well above previous estimates of $95 billion and $113 billion, respectively.

Should investors sell immediately? Or is it worth buying Broadcom?

The growth within the AI segment is particularly striking. Analysts expect Broadcom’s AI-related revenue to surpass the $10 billion mark by 2027, yet see a path for this to expand to an annual range of $40 to $50 billion starting in 2028. On the bottom line, earnings per share are projected to climb to $10.31 in 2026 and $13.88 in 2027. In a more optimistic scenario—should OpenAI proceed with its expected capacity expansion—EPS could potentially reach $20 in 2027 and climb as high as $30 by 2028.

A Rapidly Diversifying Client Portfolio

Broadcom’s success is not reliant on a single client. The company’s customer base for its custom silicon solutions is diversifying at a rapid pace. Meta is scheduled to launch its first AI chip incorporating High Bandwidth Memory in the third quarter of 2026. This will be followed by the introduction of a custom OpenAI ASIC chip in the fourth quarter of the same year, underscoring the broadening demand for specialized AI hardware.

A Compelling Technological Edge

The foundation of Broadcom’s strong market position lies in its technological advantage. The company’s custom AI accelerators deliver a performance-per-watt that is three to five times greater than that of traditional GPU solutions, all while maintaining significantly lower per-unit costs. This powerful combination of superior efficiency and compelling economics is perfectly aligned with the needs of hyperscalers who are undertaking massive expansions of their data center infrastructure.

The financial quality of this business is equally impressive, as evidenced by a gross margin of 77.2 percent. Broadcom has consistently surpassed market expectations for eight consecutive quarters, and these earnings beats have typically been followed by stock price advances of 10 to 20 percent on the day of release. With a market capitalization of $1.71 trillion, Broadcom has firmly established itself among the world’s most valuable technology corporations.

Sentiment on Wall Street remains overwhelmingly positive, with 27 analysts issuing buy recommendations compared to just two hold ratings. While the average price target currently sits at $394, the new $480 target from Jefferies represents the most bullish outlook on the street. The upcoming quarterly results will serve as the next critical test to determine if this high level of optimism is indeed warranted.