Broadcom Jumps After Daiwa Upgrades Stock Citing ‘Four Strong Drivers’ — But Retail’s Not Convinced

Broadcom (AVGO) shares climbed more than 2% in afternoon trading on Wednesday after Japanese investment bank Daiwa upgraded the stock to ‘Buy’ from ‘Outperform.’ 

However, Daiwa lowered its price target to $225 from $275, which still implies a 30% upside from current levels.

The bank outlined four key drivers of Broadcom’s growth in 2025. The company "should remain an AI winner," it told investors in a research note reported by TheFly.

Daiwa pointed to Broadcom’s advancements in application-specific integrated circuit processors (ASICs) as a major growth catalyst. 

The company has been developing custom AI accelerators, known as XPUs, designed to optimize AI workloads for hyperscalers. These ASICs enhance performance and energy efficiency by tailoring computing power to specific tasks.

Demand for these AI-focused chips has surged, with Broadcom’s AI semiconductor revenue jumping 77% year-over-year in the first quarter(Q1)  of the fiscal year 2025. The company said it expects this momentum to continue as hyperscalers ramp up investment in AI infrastructure, during its earnings call. 

Broadcom has also made significant strides in networking solutions, a second key driver cited by Daiwa.

The semiconductor giant recently introduced the Jericho3-AI ASIC, a high-performance switch chip built to support large-scale GPU clusters. The chip enables port speeds of up to 800 gigabytes per second (gbps) and can scale to connect more than 32,000 GPUs, addressing network bottlenecks in AI computing environments.

Daiwa also highlighted Broadcom’s acquisition of VMware, a $61 billion deal that has expanded its reach in cloud computing and enterprise software.

While VMware initially reported revenue declines post-acquisition, the transition to a subscription-based model is expected to boost long-term growth. Broadcom’s enterprise software segment has seen accelerated revenue generation as VMware integration progresses.

The company has stated that the acquisition positions it as a stronger player in the enterprise software market, complementing its semiconductor business and diversifying its revenue streams.

Broadcom’s semiconductor division, which has faced two years of sluggish growth, is now showing signs of a rebound – Daiwa’s final reason for its bullish stance.

The company reported strong Q1 fiscal 2025 earnings, with semiconductor solutions contributing $8.21 billion to revenue, an 11% year-over-year increase. 

Broadcom expects further growth in the segment, projecting AI semiconductor revenue to reach $4.4 billion in the second quarter (Q2), fueled by continued hyperscaler investment.

Broadcom retail sentiment and message volume on April 2 as of 12:55 p.m. ET | Source: Stocktwits

On Stocktwits, however, the retail sentiment around Broadcom’s stock remained in ‘bearish’ territory. 

One user expressed skepticism on the stock’s price movement.

https://stocktwits.com/Tkilla095/message/610089166

Another noted that the stock has closed in positive territory each day this week despite opening in the red.

Broadcom shares are down more than 26% in 2025 but have gained 31% over the past 12 months.

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