Broadcom (AVGO.US) is favored by Citi: Target price raised to $415 after cooperating with OpenAI

The Zhitong Finance App learned that after chipmaker Broadcom (AVGO.US) and Microsoft-supported OpenAI announced a cooperation on a “10 gigawatt customized AI accelerator” on Monday, Citi immediately raised the target price of the stock from $350 to $415 and maintained a “buy” rating.

A team of analysts led by Christopher Danely pointed out that although Broadcom did not give an official forecast, they estimate that the deal is expected to bring the company about 100 billion US dollars in revenue over the next few years, and contribute a total profit of 8 US dollars per share. Shipments of the first custom chips will begin at the end of 2026, and the delivery cycle will continue until 2029.

Citi mentioned that OpenAI has now announced a total AI infrastructure plan of 26 gigawatts; the bank's AI analyst Heath Terry estimates that the construction cost per gigawatt is about 50 billion US dollars, which means that the cumulative capital expenditure can reach 1.3 trillion US dollars by 2030. Terry expects OpenAI's revenue to increase from about $12.5 billion in 2025 to $163 billion in 2030.

Danely and others also believe that the “$10 billion customer” revealed by Broadcom in its third fiscal quarter earnings report is likely xAI.

According to the model, Broadcom's AI business revenue is expected to increase more than fourfold from about US$22 billion in 2025 (accounting for 33% of total sales) to US$85 billion (accounting for 65%) in 2027.