According to CNBC, Jefferies just named Broadcom as its top semiconductor pick with a buy rating and raised price target from $415 to $480 per share. That represents 32% upside from Monday’s close, driven by accelerating demand from hyperscalers like Google, Meta, and OpenAI for custom AI chips. Analyst Blayne Curtis noted Google’s token processing has exploded from 480 trillion in April to 1,300 trillion in October, with even more growth expected. Jefferies sees $60 billion in revenue upside by 2027, with Google driving most of it but Meta and OpenAI adding meaningful volumes. Broadcom shares have already surged 56% this year amid the AI frenzy.
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The AI Gold Rush
Here’s the thing about these hyperscaler ASIC deals – they’re basically the semiconductor equivalent of striking oil. Google’s been Broadcom’s main custom chip customer for years, but we’re talking about volumes becoming “much more meaningful” in 2026 and 2027. That’s a long runway, and the numbers are staggering. 1,300 trillion tokens processed monthly? That’s nearly triple what Google was handling just six months ago.
But let’s be real – everyone’s chasing Nvidia’s shadow in this AI race. Jefferies admits NVDA remains the leader, but they’re betting Broadcom has “greater magnitude of estimate upside” because of these custom chip contracts. It’s a smart play – while everyone fights over Nvidia’s GPUs, Broadcom is quietly building the specialized tools for the biggest AI players.
The Risk Everyone’s Ignoring
Now, here’s what makes me nervous. We’re talking about 2026-2027 revenue projections in an industry where technology shifts happen overnight. AI demand is white-hot today, but what happens if we hit an AI winter or if these hyperscalers decide to bring chip design entirely in-house? Google’s been dabbling with its own TPUs for years.
And let’s not forget – Broadcom’s stock is already up 56% this year. A $480 price target assumes everything goes perfectly for the next three years. But in semiconductors, things rarely go perfectly. Supply chain issues, geopolitical tensions, or simply missing a technology transition could derail this entire thesis.
The real question is whether this AI demand is sustainable or if we’re in another bubble. Remember the metaverse hype? Companies were making similarly bold projections about virtual reality adoption that never materialized. I’m not saying AI is the metaverse, but when analysts start throwing around $60 billion revenue upside numbers, it pays to be skeptical.
The Bigger Picture
Basically, Broadcom has positioned itself as the arms dealer in the AI wars. While Nvidia sells the flashy fighter jets, Broadcom is building the custom weapons for each military. It’s a great business – until the wars end or your customers decide to build their own weapons factories.
The Google relationship is particularly interesting. They’ve been partners for years, but now we’re seeing volumes that could fundamentally change Broadcom’s business mix. If Google’s token processing keeps doubling every six months, even these optimistic estimates might prove conservative.
But here’s my take: semiconductor stocks always trade on future expectations, and right now the expectations for AI are sky-high. Broadcom looks well-positioned, but investors should remember that what goes up in semis often comes down just as fast. The $480 target assumes a perfect execution in a perfect market – and we rarely get either.
