Citi raised the price target on Broadcom’s (NASDAQ:AVGO) stock to $415 from $350 after the chipmaker and Microsoft (NASDAQ:MSFT)-backed OpenAI (OPENAI) announced a collaboration for 10 gigawatts of custom AI accelerators on Monday.
The firm maintained a Buy rating on Broadcom’s stock.
Analysts led by Christopher Danely said that while Broadcom did not provide an estimate, they believe this deal could be worth $100 billion and $8.00 in EPS over the next few years. The analysts expect the first shipments to start towards the end of 2026 and continue through 2029.
The analysts noted that OpenAI has announced a total of 26 gigawatts of capacity so far and their AI analyst Heath Terry estimates a cost of about $50B per gigawatt, which would translate to $1.3 trillion in cumulative capital expenditure by 2030. Heath estimates OpenAI revenue to grow from around $12.5B in 2025 to $163B by 2030.
Danely and his team believe that the $10B customer that Broadcom disclosed in fiscal third quater earnings is likely xAI.
The analysts are modelling Broadcom’s AI business to more than quadruple from about $22B in 2025 (33% of sales) to $85B (65% of sales) in 2027.