Broadcom’s AI Chip Growth With OpenAI Faces VMware And Valuation Risks

Find your next quality investment with Simply Wall St’s easy and powerful screener, trusted by over 7 million individual investors worldwide.

• Broadcom (NasdaqGS:AVGO) has secured a multi year supply agreement to provide custom AI chips to OpenAI.

• The company is expanding its role as a custom AI silicon partner for hyperscalers, including Google and other large cloud providers.

• At the same time, Broadcom is dealing with VMware customer churn tied to subscription changes and fresh geopolitical and regulatory risks.

Broadcom, trading at about $331.3 per share, is involved in some of the highest profile AI infrastructure build outs through its custom ASIC work with OpenAI and major cloud platforms. The stock shows a very large 3 year return and a 1 year return of 51.1%, which reflects the degree of investor focus on its role in AI and data center infrastructure.

For investors, a key tension is that Broadcom is participating in multibillion dollar AI programs with a concentrated set of hyperscaler customers, while also working through VMware related customer churn and geopolitical exposure that could affect operations. The way the company navigates opportunities in custom AI silicon alongside these risks may influence sentiment around NasdaqGS:AVGO over the medium term.

Stay updated on the most important news stories for Broadcom by adding it to your watchlist or portfolio. Alternatively, explore our Community to discover new perspectives on Broadcom.

How Broadcom stacks up against its biggest competitors

• ✅ Price vs Analyst Target: At US$331.30, Broadcom trades about 30% below the US$458.59 analyst price target range midpoint.

• ❌ Simply Wall St Valuation: Shares are flagged as trading 15.3% above estimated fair value, suggesting a valuation premium.

• ❌ Recent Momentum: The 30 day return is about a 4.7% decline, showing recent weakness despite the high profile AI news.

Check out Simply Wall St’s in-depth valuation analysis for Broadcom.

• 📊 The OpenAI and hyperscaler custom AI chip deals concentrate Broadcom further in large AI infrastructure programs, which can be a key part of the thesis.

• 📊 Watch the P/E of 67.9 versus the Semiconductor industry average of 41.9, the analyst target range of US$370 to US$535, and how AI related revenue contributes to the top line.

• ⚠️ VMware related customer churn and new geopolitical or regulatory constraints could pressure both growth optionality and Broadcom’s relatively high valuation.

For the full picture including more risks and rewards, check out the complete Broadcom analysis.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include AVGO.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com