Could Broadcom (AVGO) Really Soar to $400? These Pros Think So.

After the latest 20% past-week melt-up in Broadcom (NASDAQ:AVGO) stock, perhaps the Street-high price target of $400 isn’t all too outlandish, after all. In fact, Wall Street may need to revisit the drawing board again, with new upside targets following that impressive round of quarterly earnings results. Now up close to 60% year to date and 134% over the past full year, AVGO shares are now hotter than Nvidia (NASDAQ:NVDA) stock.

While it’s too soon to tell if there’s a changing of the tides in the AI scene, I continue to view Broadcom as a higher-upside bet for the next year and beyond. Undoubtedly, Nvidia’s latest quarter, while solid, raised concerns about the pace of spending on AI. Either way, Broadcom continues to stand out as a must-own name in semiconductors, especially for big shareholders in Nvidia.

Has Broadcom become the new Nvidia?

Indeed, it’s not hard to envision a scenario that sees custom silicon eating more into the share of GPUs. Before you dump your Nvidia shares and back up the truck on AVGO after its latest parabolic run, though, it’s likelier than not that increased investment in custom AI solutions won’t leave much of a dent in demand for Nvidia’s next-generation offerings, at least over the medium term. After all, there’s an AI infrastructure boom going on.

Of course, only time will tell what the AI spenders will do. Nvidia’s profoundly sticky ecosystem (think CUDA) is worth staying in, especially if pursuing custom silicon proves too pricey at this juncture, when it’s not all too clear what kind of returns on AI investment will actually be. Given such uncertainties, owning both names seems like the best move.

While Nvidia may now seem like the relative value bet after dragging its feet (28% year-to-date gains are still incredible) relative to Broadcom, some analysts still have high hopes (and high price targets) for the stock, even after more than quadrupling in under two years.

HSBC, Barclays, and a slew of other big-name analysts on Wall Street see $400 per share as the next stop for those red-hot shares of Broadcom. Arguably, $400 is the new high watermark and median target in the analyst community. If AVGO stock can gain over 9% in a single day as the CEO ties his pay to the firm’s AI-related revenue targets, you can bet that another 9% (that’d put AVGO stock comfortably above the $400 per-share level) isn’t all too far off.

Shares still look modest given the strength in ASICs and potential for a custom silicon boom

Despite the multi-bagger gains behind AVGO shares, the $1.74 trillion semi firm still has plenty of room to the upside as ASICs (Application Specific Integrated Circuits) pick up speed, perhaps allowing Broadcom to absolutely crush quarterly estimates ahead of it. Indeed, Oracle (NYSE:ORCL) sure showed Wall Street that obscene 30-40% single-day moves are still possible as a mega-cap company.

And while it’s hard to tell just how much of an AI-induced upside surprise Broadcom can deliver on ASICs, I do think that the modest 37.1 times forward price-to-earnings (P/E) isn’t all too high a price to pay for a firm that may very well be skating to where the puck is headed next in AI.

Analysts over at HSBC, which boasts a $400 price target on the stock, did note of some valuation risk with the name. If AI is overdue for a pullback, it’s unlikely that AVGO shares would be spared, at least in my view. Though there’s potential for record-breaking growth, I think investors should watch the name and look to pounce on any pullbacks, given that a lot of the upbeat analyst commentary seems more than baked into the share price after Broadcom’s latest earnings beat.

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