Broadcom Inc. (NASDAQ: AVGO) is experiencing a positive boost, with shares trading 1.72% higher this morning at $353.57, driven by its inclusion in Goldman Sachs' prestigious US Conviction List. This endorsement signals strong confidence in the semiconductor and infrastructure software solutions provider's market position and future growth prospects.
Goldman Sachs analysts, as part of their monthly update, highlighted Broadcom's “dominant” position in enterprise networking silicon as a key factor for its inclusion on the Conviction List. The firm anticipates that this strength will translate into increased market share in custom silicon processors, particularly among major U.S. hyperscalers. This outlook underpins Goldman Sachs' “Buy” rating on Broadcom shares, accompanied by a price target of $450.
This positive sentiment comes amidst a backdrop of significant developments for Broadcom. In October 2025, the company announced a strategic collaboration with OpenAI to co-develop custom AI accelerators. This ambitious project involves deploying 10 gigawatts of OpenAI-designed AI accelerators, scheduled to commence in the latter half of 2026 and continue through 2029. Many analysts believe this partnership represents a substantial $10 billion custom AI chip order, solidifying Broadcom's expanding footprint in the burgeoning AI hardware sector.
Price Targets
Broadcom's financial performance has demonstrated considerable strength. The company reported a 22% revenue increase in Q3 FY2025, fueled by the integration of VMware and robust demand for its AI solutions. However, despite exceeding Wall Street's expectations in its latest quarterly results, Broadcom's stock experienced a notable decline. On December 12, 2025, shares fell over 11% following the company's guidance for a gross margin of 76.9% for the current quarter, a decrease from 79% in the preceding year. This margin compression sparked investor concerns regarding the profitability of Broadcom's AI ventures.
Bull Case:
- Inclusion in Goldman Sachs' prestigious US Conviction List, signaling strong institutional confidence.
- Dominant market position in enterprise networking silicon and anticipated growth in custom silicon for hyperscalers.
- Strategic collaboration with OpenAI, representing a potential $10 billion custom AI chip order.
- Strong revenue growth (22% in Q3 FY2025) driven by the VMware acquisition and high demand for AI solutions.
- Positive analyst ratings, including an “Overweight” from Morgan Stanley with a high price target.
Bear Case:
- Recent significant stock decline (over 11%) following quarterly results, despite beating expectations.
- Guidance for lower gross margins has sparked investor concerns about the profitability of its AI ventures.
- Short-term stock price volatility driven by concerns over margin compression.
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