TLDR
- Wolfe Research upgraded Broadcom stock to Buy with a $400 price target, citing rapid growth in demand for Alphabet’s TPU chips
- The firm projects TPU shipments could reach 7 million units annually by 2028, with Broadcom positioned as the main beneficiary
- Wolfe raised its 2026 AI chip revenue forecast to $44 billion and 2027 estimate to $78.4 billion for Broadcom
- AI networking revenue is expected to grow 75% in 2026 and 55% in 2027 as data center spending remains strong
- Analyst Chris Caso says Broadcom’s valuation remains reasonable despite the rally in AI stocks, with Wall Street consensus showing a Strong Buy rating
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Broadcom received a bullish upgrade from Wolfe Research on Friday. The firm raised its rating from Neutral to Buy and set a $400 price target.
Broadcom Inc., AVGO
The upgrade represents a 21% upside from current levels. Analyst Chris Caso said the decision reflects fast-growing demand for Alphabet’s Tensor Processing Units.
“We can no longer ignore the growth and strength of TPUs,” Caso stated. His checks suggest annual shipments could reach 7 million units by 2028.
Caso believes Google’s move to offer TPUs to outside customers marks a major shift in the AI chip market. This creates a real alternative to Nvidia’s GPUs.
Broadcom stands to benefit from this shift. The company is positioned as one of the key beneficiaries in the TPU ecosystem.
Revenue Projections Climb Higher
Wolfe raised its long-term outlook for Broadcom. The firm now expects the company to generate $154.5 billion in revenue by 2027.
Earnings per share are projected to hit $16 in 2027. This reflects stronger demand for AI-related chips across the market.
Caso noted there could be further upside from additional AI programs. These programs are not yet fully reflected in current estimates.
For 2026, Wolfe increased its AI chip revenue forecast to about $44 billion. This estimate is driven by roughly 3.3 million TPU shipments.
The 2027 AI revenue projection now stands at $78.4 billion. This forecast is supported by expected shipments of around 5.1 million units.
Networking Growth Adds to the Story
Beyond chips, networking is another important growth driver for Broadcom. Wolfe expects AI-related networking revenue to rise 75% in 2026.
The growth continues into 2027 with a projected 55% increase. Data center spending remains strong and supports these projections.
The firm forecasts networking revenue to reach $15.1 billion in 2026. This aligns with estimates for other major players in the networking space.
Despite the strong rally in AI stocks, Wolfe believes Broadcom’s valuation remains reasonable. The $400 price target represents approximately 22 times the bull case earnings power.
This multiple sits below Broadcom’s three-year average of about 25 times earnings. Caso said the company is well positioned to benefit from continued growth in AI spending.
Wall Street shows strong confidence in Broadcom. The stock has a Strong Buy consensus rating based on 29 Buy ratings, one Hold, and zero Sell ratings.
The average price target stands at $457.75. This implies 38.41% upside potential in 2026.
Wolfe sees a bull case scenario where Broadcom could reach around $18 in earnings per share by 2027. This would happen if the company can double its AI revenue again that year.
