Wolfe upgrades Broadcom on TPU scale-up, sees AI driving earnings power

Investing.com — Wolfe Research upgraded Broadcom Inc (NASDAQ:AVGO) to Outperform, with price target of $400 on growing confidence in the scale and competitiveness of Google’s tensor processing unit program and Broadcom’s position as a key beneficiary.

The firm said its channel checks suggest TPU shipments could reach about 7 million units annually by calendar 2028, a level that Wolfe said it can no longer ignore.

Google’s move to make TPUs available to third parties is creating a credible alternative to Nvidia’s GPUs, with Broadcom expected to capture much of the associated custom silicon demand.

Wolfe raised its calendar 2027 estimates to $154.5 billion in revenue and $16 in earnings per share, reflecting higher assumed TPU volumes and stronger AI-related contributions.

It said additional upside is possible from other custom accelerator programs not fully reflected in its forecasts, including projects linked to Meta and OpenAI.

For calendar 2026, Wolfe revised its AI ASIC revenue estimate to about $44 billion, based on roughly 3.3 million TPU shipments. It lifted its calendar 2027 AI revenue estimate to $78.4 billion, assuming around 5.1 million units.

The firm expects TPUs to drive the majority of Broadcom’s XPU growth, with other programs accounting for 17% of XPU revenue in 2026 and 14% in 2027.

Wolfe also modeled networking revenue of $15.1 billion in 2026, up about 75% year on year, and expects AI networking revenue to grow about 55% in 2027. It left estimates for non-AI semiconductors and infrastructure software unchanged.

Wolfe said its $400 target reflects about 22 times a bull-case earnings scenario of $18 per share in 2027, which assumes Broadcom can double AI revenue again that year.

The multiple sits below the stock’s roughly 25 times average over the past three years, covering the AI spending cycle.

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