HSBC Research has revised its outlook on Broadcom (AVGO, Financial) from a conservative stance to a more optimistic one. Previously, the firm was cautious due to uncertainties in the ASIC client pipeline and concerns over market share losses in Apple's (AAPL) wireless segment, as well as potential slowdowns in VMware. Now, HSBC is confident that Broadcom's ASIC revenue will exceed market expectations, thanks to improved project visibility and stronger pricing power.
HSBC has upgraded Broadcom from "hold" to "buy," raising the target price from $240 to $400. The firm believes the market has underestimated the revenue potential of Broadcom's ASIC business for fiscal years 2026 and 2027. HSBC has significantly increased its revenue forecasts for the ASIC business by 58% and 96%, to $28.4 billion and $42.8 billion, respectively, outpacing market expectations by 42% and 69%.
This optimistic view is driven by anticipated increases in capital expenditure for ASIC projects in large-scale AI servers, with the expectation that the scale of these projects will expand, resulting in a notable premium in pricing.
