All eyes are on Nvidia Corp (NASDAQ: NVDA) this morning as the artificial intelligence giant continued to extend gains and become the world’s first $4.0 trillion company.
However, a senior JPMorgan analyst is all praise for a different chip stock instead.
On Wednesday, Harlan Sur reiterated his “overweight” rating on Broadcom Inc (NASDAQ: AVGO), saying the multinational is “firing on all cylinders.”
Sur’s bullish call on AVGO shares is significant given they’re already up nearly 90% versus their year-to-date low in the first week of April.
JPM analyst sees Broadcom stock hitting $325
Harlan Sur now sees upside in Broadcom stock to $325, which indicates potential for another 20% gain from current levels.
JPM analyst issued the positive note in the company’s favour following a meeting with the top management that revealed no signs of slowing momentum in its AI-focused custom-chips segment.
In fact, executives at the NYSE-listed behemoth talked of recovery in the non-AI business as well, further underpinning Sur’s constructive view on AVGO.
“The team is seeing a gradual U-shaped recovery in its non-AI semiconductor business, reflected in the bookings/order inflection the team is seeing now, which could contribute to the positive EPS revision cycle next year.”
AI leadership could drive AVGO share price up further
JPMorgan recommends sticking with AVGO stock despite its massive run in recent months, mostly because it’s a leader in a broad range of fast-growing end markets.
These include wireless, data center networking, AI/deep learning ASICs, infrastructure silicon, and storage.
All in all, Harlan Sur remains convinced that Broadcom shares are worth owning at current levels since the chipmaker is a “technology infrastructure powerhouse with unmatched scale and technology capabilities.”
What’s also worth mentioning is that the semiconductor company has guided toward $50 billion in artificial intelligence revenue by fiscal 2027 – a massive leap from $12.2 billion in FY 2024.
Broadcom is trading at a premium valuation
Investors should note, however, that Broadcom stock is not particularly inexpensive to own at the current level.
At the time of writing, the chip stock is going for a forward price-to-earnings multiple of about 50, significantly higher than several other AI stocks, even including Nvidia, that just became the world’s first $4 trillion firm.
That’s part of the reason why other Wall Street shops are not nearly as bullish on AVGO shares as JPMorgan.
According to The Wall Street Journal, while the consensus rating on the semiconductor stock remains a “buy,” the mean target of about $291 indicates potential upside of hardly 5% from here only.
That said, Broadcom is a dividend stock that currently yields 0.86%, which makes it at least a bit more attractive to own at current levels, at least for the income investors.
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