Key Morningstar Metrics for Broadcom
- : USD 650.00Fair Value Estimate
- : ★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
OpenAI and Broadcom AVGO publicly announced OpenAI’s new custom AI compute chip, dubbed Jalapeno. This follows a public partnership announcement in the fall of 2025, in which the firms agreed to collaborate on 10 gigawatts of AI compute capacity between 2026 and 2029.
Why it matters: Broadcom stock has been pressured by market worries over competition for Google’s TPU design. We believe its position in Google is sound, and we see a diversified customer base for Broadcom’s custom AI chips, including massive volumes to OpenAI, which is a key tenet of our call.
- We expect immense growth for Broadcom through 2028, led by OpenAI, Anthropic, and Google. Broadcom expects to deploy 20 gigawatts over the next two years, specifically for Anthropic and OpenAI, implying USD 200 billion-USD 400 billion in sales in that period from these customers alone.
- Rumors have swirled about MediaTek taking a share of Google’s TPU. We expected Google to bring in a second source and to see Broadcom maintain the lion’s share of TPU volumes for at least the next five years. Multisourcing is natural in AI infrastructure, and Broadcom has a technological lead.
The bottom line: We affirm our USD 650 per share fair value estimate for wide-moat Broadcom, which remains one of our top picks in semis. We expect a massive AI chip opportunity, and believe the market is overly pessimistic on share loss. Shares are flat intraday, but down 20% since earnings in early June.
- Broadcom kept its fiscal 2027 guidance of “more than USD 100 billion” in AI chip revenue in June. We see this as conservatism, not weakness. We forecast USD 125 billion in AI revenue in 2027, and USD 200 billion in 2028. There’s upside if it achieves all 20 GW between OpenAI and Anthropic.
Big picture: We believe custom AI chips, or XPUs, will grow rapidly, taking share from Nvidia GPUs en route to 25% of AI compute share. Broadcom is the technology and market-share leader in XPUs, and this secular trend should drive immense growth that the market isn’t pricing in.
