Broadcom (AVGO) is a semiconductor giant with a vast product portfolio spanning wired infrastructure, wireless communications, enterprise storage, and industrial end markets.
The company positioned itself as a major player in enterprise infrastructure software following its 2023 acquisition of VMware.
The stock has gained 22.64% in the past month, according to Yahoo Finance at the time of writing, Saturday morning, May 9. Meanwhile, the SPDR S&P 500 index (SPY) is up 9.11% in the same period.
Broadcom’s rally started with the company’s extension of its partnerships with Google and Anthropic on April 6.
Another key move was Broadcom’s extension of its partnership with Meta (META). Broadcom will deliver technology supporting Meta Training and Inference Accelerator (MTIA) chips, with plans to extend through 2029.
Intel’s earnings boosted confidence in the semiconductor sector.
Broadcom’s latest announcement also pushed the stock higher.
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Broadcom unveils VMware Cloud Foundation 9.1
On May 05, Broadcom unveiled VMware Cloud Foundation (VCF) 9.1, an infrastructure platform for production AI workloads.
According to the company, VCF 9.1 enables enterprises to deploy inference and agentic AI applications at significantly lower cost, with enhanced security and the freedom to choose GPU and CPU hardware.
Broadcom says VMware Cloud Foundation 9.1 benefits include:
- Up to 40% reduction in server costs for clusters running a mix of AI and non-AI workloads.
- Up to 39% lower storage total cost of ownership through enhanced compression and deduplication for AI data pipelines.
- Up to 46% reduction in Kubernetes operational costs for running AI workloads at scale.
- 4x faster cluster upgrades and 2x increased fleet capacity to rapidly scale AI infrastructure.
- All statistics are based on internal Broadcom estimates or test results and are subject to change.
It is unsurprising that this announcement caused the stock to move up. We can get a clearer picture by looking at Broadcom’s latest Form 10-Q. It shows that revenue can be divided into two segments: semiconductor solutions and infrastructure software.
Of the total revenue of $19.3 billion, $12.5 billion came from semiconductor solutions and $6.8 billion came from infrastructure software. However, if we take a closer look, we’ll see that the cost of revenue, research and development, and other expenses are much higher for the semiconductor segment.
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This is best shown through operating income, which was $5.3 billion for infrastructure software and $7.5 billion for semiconductor solutions. Or to put it plainly, Broadcom strengthened its most profitable revenue segment with the latest release.
In a research note shared with me, Goldman Sachs analyst James Schneider and his team provided their opinion on what they call the Agentic Economy. As Broadcom plays a big role in the AI space, they also updated their opinion on Broadcom stock.
Goldman Sachs says AI agents can lift global token consumption
The team believes Agentic AI could shift token consumption. They estimate that consumer AI agents could increase global consumer token consumption 12 times by 2030.
They estimate approximately 23 billion AI queries per day by 2030, up from approximately 5 billion in 2025. They see that up to 30% of these queries will be directed to agents across search, shopping, travel, email, and other personal productivity functions.
Analysts estimate that enterprise AI agents will increase global enterprise token consumption by 24 times by 2030 and by 55 times by 2040. Schneider wrote: “Enterprise adoption of agentic AI is still early: while surveys suggest 70–90% of enterprises are experimenting, less than one-quarter are scaling agents.”
Related: Goldman Sachs resets Nvidia stock forecast ahead of earnings
The team said they see a clearly positive impact on semiconductor companies from ongoing capital expenditures by hyperscalers and LLM providers. Analysts believe that falling token costs will make token-intensive use cases economically viable, thereby increasing the addressable compute market.
The team believes that more hyperscalers and LLM model providers will turn to Broadcom to deliver cost-optimized chip solutions tailored to their specific workloads.
Schneider reiterated a buy rating for Broadcom stock and the target price of $480, based on a 30 multiple of his normalized EPS estimate of $16.
Analysts noted key downside risks for Broadcom:
- Slowdown in AI infrastructure spending,
- Share loss in the custom compute franchise,
- Persistent inventory digestion in non-AI.
- Increased competition in VMware.
Related: Goldman Sachs sets jaw-dropping AMD stock price target after earnings
