Key Takeaways
- Analyst Stacy Rasgon at Bernstein assigns “outperform” ratings to both Broadcom and Nvidia while holding stakes in each
- Shares of Broadcom jumped 4.7% following the release of Rasgon’s optimistic research note on AI semiconductor stocks
- Rasgon believes both companies could reach approximately 15x forward earnings multiples, indicating room for growth
- The firm maintains a reserved position on AMD, seeking more definitive evidence of organic customer traction
- Intensifying AI infrastructure buildout is creating memory chip shortages and elevating component pricing
Stacy Rasgon, an analyst covering semiconductors at Bernstein, released an optimistic research report on artificial intelligence chip manufacturers Monday, propelling Broadcom shares up 4.7% during morning trading hours. Rasgon assigned “outperform” ratings to both Broadcom and Nvidia while disclosing that Bernstein maintains investment positions in these companies.
According to Rasgon, artificial intelligence infrastructure spending “currently shows no signs of slowing.” He characterized Broadcom’s current market valuation as “absurdly attractive” when measured against its expansion potential.
Broadcom’s most recent quarterly results showed revenue climbing 16%, while profitability soared 173%. The stock has retreated approximately 22% from its December 2024 peak of $413 per share.
Trading around $324 per share currently, Broadcom carries a valuation of roughly 60 times historical earnings. Rasgon forecasts earnings per share reaching $20 or higher by 2027, which would translate to a forward multiple below 16 times.
This projection implies approximately 400% earnings expansion over a two-year period — averaging around 100% annual growth. Rasgon suggested that Wall Street’s current consensus forecasts for both Broadcom and Nvidia might still be underestimating actual results.
Bernstein Distinguishes Between AI Chip Leaders and Laggards
Bernstein establishes a distinct separation between semiconductor companies it recommends and those it views skeptically. While Nvidia and Broadcom receive endorsements, Advanced Micro Devices remains on the watchlist.
Rasgon noted that AMD has recovered from its recent bottom levels. However, Bernstein requires stronger confirmation that enterprise customers are purchasing AMD processors due to authentic performance requirements rather than simply compensating for constrained supply from rivals.
Without more compelling proof of sustainable momentum, Bernstein indicates it prefers maintaining a neutral stance on AMD. The research firm stops short of issuing a negative recommendation but refrains from advocating purchases.
Booming AI Infrastructure Creating Ripple Effects Across Technology Sector
Robust artificial intelligence deployment is beginning to generate complications in adjacent technology markets. The explosion in hyperscale data center construction is constraining memory chip availability and driving component costs upward.
Industries including personal computers and mobile devices are starting to experience pressure as data center operators consume increasing supply. Escalating input costs are simultaneously compressing profit margins throughout various technology segments.
Rasgon recognized these market dynamics but emphasized they don’t alter his fundamental thesis on Nvidia or Broadcom. Both enterprises remain favorably positioned in his assessment, with underlying demand patterns still accelerating.
Bernstein disclosed it maintains equity positions in both Nvidia and Broadcom as of the research note published Monday, March 24.
