It has been a tough start to the year for Broadcom (NASDAQ:AVGO), and shares have fallen almost 20% as 2025 enters its third month. Much of these losses came on the heels of the DeepSeek shock, which sent markets reeling and semiconductor shares tumbling.
The Chinese tech company’s AI chatbot is able to function on significantly less computing power than previously thought necessary, and its introduction sowed doubts regarding the future of AI capex spending by the hyperscalers.
So far, however, these fears seem to be overblown, and the hyperscalers are plowing ahead with plans to invest hundreds of billions of dollars in AI infrastructure this year alone. That being said, AVGO shares have yet to recover their shine heading into the company’s Q1 FY 2025 earnings on March 6th, as tariff fears are also contributing investor worries.
One investor known by the pseudonym Lighting Rock Research thinks that the falling prices have created a “great opportunity” to increase a position in Broadcom.
“I anticipate 20% revenue growth for Broadcom in FY25, with the Semiconductor Solutions segment projected to grow 30% annually, driven by custom silicon and network solutions,” predicts the 5-star investor.
Lighting Rock contends that Broadcom’s custom silicon portfolio should be in prime position to propel growth, thanks to partnerships with major customers such as Alphabet and Meta. In particular, the investor spotlights Meta’s plans to increase production of its Meta Training and Inference Accelerator silicon during the current year.
Lighting Rock also cites media reports that OpenAI is working to finalize its first custom AI chip with Broadcom in the coming months, which will then be sent to TSM for large-scale manufacturing next year.
“With these large customers, Broadcom is well positioned to capture the rapid growth of (the) custom silicon market,” adds Lighting Rock.
Though bullish overall, the investor is not immune to worries about the growing trade tensions. Lighting Rock acknowledges that a U.S.-China trade clash would certainly create challenges for global semiconductor firms such as AVGO.
Still, looking at the spending decisions of big tech, Lighting Rock expects good things from Broadcom going forward.
“As major Hyperscalers have increased their CAPEX spending for FY25, I anticipate Broadcom’s revenue growth accelerating in FY25,” concludes Lighting Rock Research, who is upgrading AVGO to a Strong Buy. (To watch Lighting Rock Research’s track record, click here)
Wall Street could hardly agree more with this assessment. With 24 Buy and 2 Hold ratings, AVGO claims a Strong Buy consensus rating. Its 12-month average price target of $240.70 has an upside just shy of 30% for the coming year. (See AVGO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.