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Nvidia CEO Jensen Huang says OpenAI's Astra marks the arrival of artificial general intelligence, but for investors the message is about hardware. Huang said Astra was trained on more than 100,000 Nvidia Grace Blackwell systems and that another 400,000 GPUs are coming online.
Broadcom delivered record revenues, gross profits, and free cash flow, driven by surging AI chip and data center demand. AVGO's Semiconductor Solutions business posted 127% year-over-year growth, with a robust free cash flow margin approaching 50%. Guidance for Q4 calls for $34.8 billion in revenue, implying 93% year-over-year growth and further acceleration.
The Vanguard Information Technology Index Fund ETF should continue to outpace the S&P 500.
Nvidia closed Friday 2.6% below its 52-week high, while AMD, Micron, Broadcom, and Marvell finished 18% to 32% below theirs. Broadcom's CEO says he is looking to double AI revenue to $115 billion next fiscal year, then double it again in fiscal 2028.
I will keep touting the AI trade even though it's getting plenty of attention already.
Broadcom's chips are designed to handle some highly specific compute needs for each of its clients. Nvidia's hardware is flexible and nearly ubiquitous in data centers.
Broadcom's AI revenue is expected to double next year, and then double again. The stock looks incredibly cheap after its most recent dip.
Broadcom is rated Buy, with a $470 price target and 37% upside, as the market underappreciates its AI revenue visibility and earnings power. Management guides for $115B in FY2027 AI semiconductor revenue, supported by secured supply, hyperscaler deployments, and robust infrastructure software margins. Gross margin pressure is expected to persist due to XPU mix and memory content, but operating leverage and software profitability should cushion earnings.