TLDR
- Broadcom shares fell 2.1% to $343.64 after UBS reiterated its Buy rating and $470 price target.
- UBS says Broadcom has built a strong upward bias into its fiscal 2027 and 2028 AI revenue guidance.
- The firm pushed back on investor worries over Broadcom’s TPU program, calling the concerns misguided.
- Broadcom says it does not offer direct financing to its first major TPU customer, only a lending platform.
- First Financial Bank Trust Division raised its Broadcom stake by 22% last quarter, now worth $16.8 million.
Broadcom stock dropped 2.1% to $343.64 on Thursday, even as UBS doubled down on its bullish view of the chipmaker. The firm kept its Buy rating and $470 price target after a call with Broadcom’s CEO and CFO.
UBS analyst Timothy Arcuri said the conversation left him more confident in Broadcom’s AI revenue outlook. He believes the company has set itself up for a strong upward bias heading into fiscal 2027 and 2028.
The call focused heavily on Broadcom’s custom AI chip business. Arcuri said worries from investors about the company’s flagship XPU program are misguided.
What Broadcom Said About Its AI Chips
Broadcom told UBS that demand remains strong for the next two generations of its XPU lineup. That’s the chip family following the v8i version set to ramp in 2027.
The company is packing more SRAM and ARM CPU cores into these chips for orchestration and management. That added complexity makes it harder for in-house design teams at other companies to keep pace.
On financing, Broadcom clarified its role with its newest major customer. The company said it sells chips, not financial products.
Broadcom is not providing direct financing to that customer. Instead, it’s helping build a platform so the customer can tap third-party lenders.
The company is only guaranteeing residual value on select tranches of that financing. Management described that exposure as a small slice of the total deal.
UBS kept its estimates unchanged following the call. The $470 target is based on roughly 17 times free cash flow for Broadcom’s software business and about 30 times free cash flow for its semiconductor segment, both applied to 2027 projections.
Broadcom’s software unit is expected to contribute $31.2 billion in free cash flow that year. The semiconductor side is projected to add another $60.4 billion.
Institutional Investors Keep Buying
Away from the analyst note, First Financial Bank Trust Division disclosed it boosted its Broadcom holding by 22% last quarter. The firm now owns 47,817 shares worth about $16.8 million.
That’s not an isolated move. State Street increased its stake by nearly 9% and now holds over 208 million shares.
Norges Bank started a new position worth roughly $24.3 billion. Bank of America and Wellington Management both added to their holdings as well.
Institutional investors and hedge funds now own just over 76% of Broadcom’s stock. Wall Street’s broader view on the company remains largely positive too.
The consensus rating sits at “Moderate Buy” with an average price target of $527.20. Thirty-seven analysts rate the stock a Buy, one rates it Strong Buy, and three rate it Hold.
Broadcom last reported earnings on September 2, posting $3.32 in adjusted EPS against a $3.22 estimate. Revenue came in at $29.59 billion, up 85.5% from the same quarter last year.
The company also paid a quarterly dividend of $0.65 per share on September 30. That works out to a $2.60 annualized payout and a 0.8% yield.
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