Broadcom's Tech Dominance Affirmed by JPMorgan Analyst; Forecasts Company Will Lead AI and Cloud Revolution

JPMorgan analyst Harlan Sur initiated coverage of Broadcom Inc AVGO with an Overweight rating and a $1,550 price target. 

The firm also added Broadcom to its U.S. Equity Analyst Focus List, a growth idea.

As per the analyst, Broadcom is a technology infrastructure powerhouse with semiconductor leadership positions in AI (#2 global AI semiconductor supplier with $8 billion+ in calendar year 2024 estimated revenues), custom chip ASIC supplier ($12 billion per year), cloud datacenter/telco networking, wireless, enterprise storage, and broadband-connected home combined with a rock solid backbone of mission-critical infrastructure software business. 

The market continues to overlook the diversification story in its semiconductor and mission-critical software infrastructure franchises combined with strong free cash flow generation of the business, Sur noted. 

In its semiconductor franchise (60% of sales), the team has a leadership position in accelerated/compute AI, cloud/telco networking,

The analyst said broadband and storage allowed the team to drive above-industry-average growth. 

Over the past three years, the team has driven an 18% revenue CAGR or ~3x industry revenue growth. Sur noted that the team can continue to sustain an industry growth premium given its technology leadership and strong market share position (strong #1 or #2 position). 

Broadcom’s strategic focus continues to be on core semiconductor infrastructure, Sur said. 

The analyst is particularly constructive on the cloud data center end market, with Broadcom’s leadership in switching/routing, its custom chip (ASIC) opportunities across datacenter and artificial intelligence opportunities – with ASIC customers such as Alphabet Inc GOOG GOOGL Google, Meta Platforms Inc META, and Microsoft Corp MSFT. 

In its mission-critical software business (40% of sales), post the VMware acquisition, Sur noted revenue growth CAGR has expanded to high-single-digit percentage (from mid-single-digit percentage revenue CAGR) driven by the double-digit top-line revenue growth CAGR in the VMware business. 

Sur said the team can conduct a double-digit top-line revenue growth CAGR in the VMware business by exploiting its software-defined data center solutions via its Cloud Foundation platform and selling a full

solutions stack (HW virtualization, management, deployment) to its large enterprise customers (e.g., 10% penetration). 

In the near term, Sur noted that the team continues to drive a stable revenue growth profile even in a period of macro volatility, given its portfolio breadth/diversification/ product cycle. 

On top of this, the team continues to drive aggressive synergy/ value creation in its software business, which Sur noted will lead to higher earnings power with a step-up in gross, operating, and free cash flow margins. 

Overall, the analyst noted that the team is driving $60+ of earnings power in the second half of the 2025 calendar year. 

Sur projects FY24 revenue and EPS of $50 billion (versus $50.02 billion consensus) and $44.46 (versus $46.49 consensus).

Price Action: AVGO shares traded lower by 2.08% at $1,217.13 on the last check Tuesday.

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