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Goldman Sachs analyst Toshiya Hari reiterated a Buy rating on Broadcom Inc (NASDAQ:AVGO) with a price target of $190.
Hari listed his critical takeaways from Broadcom President Dr. Charlie Kawwas’ presentation at the Communacopia & Technology Conference 2024.
Dr. Kawwas expects increased spending by the large Tier-1 hyperscalers will drive growth in Broadcom’s AI semiconductor business in fiscal 2025.
Broadcom has positively revised its fiscal 2024 AI semiconductor revenue outlook from $7.5 billion at the beginning of fiscal 2024 to $12 billion as of last week, Hari cited Dr. Kawwas.
Dr. Kawwas reiterated Broadcom’s deep focus on markets where they can build a sustainable franchise founded on technological leadership. Dr. Kawwas shared that Broadcom has a central engineering team that develops foundational technologies like SerDes IP, which the various franchises that comprise Broadcom’s Semiconductor Solutions business leverage.
By operating with this structure, Broadcom has been able to, for example, reduce the custom accelerator (i.e., XPU) development cycle from ~3 years to less than a year, Hari cited Dr. Kawwas.
Dr. Kawwas noted that custom accelerators have benefits over merchant solutions (i.e., GPUs), particularly when addressing internal workloads at hyperscalers with consumer platforms, particularly in reduced capital spending and power consumption.
Ethernet will prevail as the preferred AI networking protocol for hyperscalers due to its open-sourced nature and superior power efficiency, Hari cited Dr. Kawwas.
Dr. Kawwas said Broadcom’s 2nd-generation Co-Packaged Optics (CPO) product will be in volume production by the end of calendar years 2025 or 2026.
He showcased Broadcom’s 2nd-generation CPO solution, which runs on 5kW and has the potential to replace 128 800G pluggable transceivers that each consume 15kW-16kW.
Hari cited Dr. Kawwas as saying Broadcom is currently in the proof of concept (POC) stage with three hyper-scale customers, with an expectation for initial deployment for live traffic in the first half of 2025.
Hari projects fiscal 2024 revenue of $51.8 billion and adjusted EPS of $3.88.
Price Action: AVGO stock traded higher by 0.86% at $165.98 premarket at the last check on Friday.
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