Broadcom’s shares surged to a new all-time high on Friday, gaining nearly 11% and pushing the AI chipmaker’s market capitalization above $1.5 trillion. The rally was fueled by a strong quarterly earnings report, an optimistic forecast, and particularly compelling commentary from CEO Hock Tan during the subsequent investor call.
While the company’s financial results were solid, the primary driver for the stock’s advance was Tan’s announcement that Broadcom has secured a fourth major customer for its custom AI chips, known as XPUs. This new client, widely believed to be OpenAI, joins a roster that reportedly includes Alphabet, Meta Platforms, and ByteDance.
This development was a significant surprise to the market, as it was not factored into existing financial projections. Tan revealed that the new partnership has already resulted in over $10 billion in orders for AI racks based on the company’s XPUs, prompting a substantial upward revision of Broadcom’s AI revenue outlook for fiscal year 2026.
The unexpected news means that previous earnings estimates for 2026 were too low. As analysts revise their forecasts, the stock’s valuation appears more justified. For instance, while the stock price jumped significantly, the consensus 2026 earnings per share (EPS) estimate has already risen by over 8.5%, from $8.22 to $8.92. Consequently, the stock’s forward price-to-earnings (P/E) ratio has remained largely stable, suggesting the rally is supported by fundamental growth. This dynamic is reminiscent of Nvidia’s performance in 2023, when its stock price soared while its valuation multiple remained steady due to rapidly escalating earnings forecasts.
Further bolstering investor confidence is Broadcom’s backlog, which has now grown to over $110 billion, providing significant business visibility for the next two years. Additionally, Tan announced he would remain CEO through at least 2030, signaling his long-term commitment to the company he has led since 2006 and transformed through strategic acquisitions, including the recent landmark deal for VMWare.
In a note to clients, analysts at Bernstein summarized the sentiment, writing, “Hock must see a runway here as he renewed his contract through 2030, suggesting he sees something worth sticking around for. We suspect that numbers are going to go up materially with potential room for further upside to come; valuation (which has admittedly looked rich) is clearly becoming justified.”
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