Broadcom Riding AI Wave to Robust Networking Sales in 2023; Raising FVE to $640 Per Share

Broadcom reported impressive fiscal first-quarter results in line with our expectations, led by strong networking demand. While some of the firm’s peers have observed slowing demand in the data center market, we think Broadcom’s advanced switching, routing, and custom silicon portfolio has allowed it to maintain solid growth. Overall, the company’s networking, storage, and broadband business units have proven resilient, including impressive artificial intelligence-, or AI-related sales in its networking segment. We anticipate healthy spending in support of transformer-based large language models such as OpenAI’s ChatGPT (generative pretrained transformer). We believe these AI models use a variety of networking switches and custom silicon from the likes of Broadcom, with competition between Microsoft, Google, and others supporting our forecast for the firm’s networking segment to grow 12% in 2023.