On Monday local time, the Philadelphia Semiconductor Index rose 3.40%, reaching a new high since January 5, 2022. Several semiconductor stocks, including Broadcom, Gexin, AMD, Intel, and Ansemy, rose together.
It is worth noting that the most significant increase is in Botong, which surged by 9% in a single day, setting the largest daily increase since May and the stock price reaching a historic high. The latest market value of Botong is 424.8 billion US dollars, with a single day market value increase of 35.1 billion US dollars, equivalent to approximately 252 billion RMB.
In the current wave of AI, in addition to the booming NVIDIA, the market is also gradually recognizing the growth potential of Broadcom.
In its latest research report, Citigroup has restored coverage of Broadcom, given a "buy" rating, and raised its target price to $1100. It is expected that Broadcom will reach a maximum of $60 EPS by 2025. The report points out that for Broadcom, the benefits brought by artificial intelligence are enough to offset the downturn in the semiconductor industry. The company's core business strength and the growth brought about by the acquisition of VMware are expected to drive its stock price higher.
In terms of ASIC, Broadcom participated in the design of every generation of Google's TPU processors, and the latter is also a major customer of Broadcom's custom computing offloading ASIC business. In addition, Broadcom also revealed in a recent conference call that it has reached cooperation with more large companies. Due to recent reports from companies such as Marvell and MediaTek, analysts believe that Broadcom is expected to receive more potential ASIC orders.
In terms of Ethernet switches, according to data from Broadcom, over $200 million of Ethernet switches have already been applied in the AI field in the fiscal year 2022. It is expected to grow to $800 million in the fiscal year 2023, and further double to $1.6-2 billion in the fiscal year 2024. Although NVIDIA InfiniBand has a market share of up to 90% in the AI network market, analysts still believe that Broadcom is expected to maintain its share and advantage due to its open design, low cost, and customer preference for a shift from NVIDIA's sole supply to diversified supply.
In terms of VMware, the company is a provider of cloud infrastructure and mobile commerce solutions, and is also the world's fourth largest system software company, leading globally in virtualization and cloud computing infrastructure. Broadcom predicts that VMware's business will grow at a double-digit compound annual growth rate.
Citigroup pointed out that Broadcom can directly benefit from AI demand, becoming the second largest semiconductor company after Nvidia. In its network business, the revenue generated by AI infrastructure is expected to increase from $4 billion in 2023 to $8 billion in 2024, with a year-on-year increase of up to 100%.
Strong AI Boosts Performance and Stock Prices of Related Chip Companies
Of course, not only Broadcom, but also chip giants, especially AI chip related giants, have achieved relatively strong growth in recent days: for example, AMD has accumulated a growth of over 15% in the past three days, and Nvidia has accumulated a growth of nearly 8% during the same period.
Among them, AMD has just launched its flagship data center AI chip, AMD Instinct MI300XGPU, and has raised the CAGR of the data center accelerator market from 40% to 70% in the next four years, which is expected to grow from $30 billion in 2023 to over $400 billion in 2027; And AMD predicts that the MI300X series will ship approximately 300000 to 400000 units in 2024, with the largest customers being Microsoft and Google. If it weren't for limited TSMC's CoWoS production capacity shortage and Nvidia's already reserved production capacity of over 40%, the shipment of this series is expected to be further improved.
The AI boom sparked by ChatGPT this year has elevated Nvidia to the throne of "semiconductor number one" - driven by the fervent demand for computing chips, Nvidia's revenue has surpassed that of Intel and TSMC, the two giants. The above stock price performance of Broadcom, AMD, and others further confirms the strong boosting effect of AI on the performance and stock prices of related chip companies.
As TSMC's Wei Zhejia has said, semiconductors are the key to the development of AI applications. It is not only necessary to continuously develop AI technology and improve computing power, but also to focus on reducing energy consumption.
After reviewing the semiconductor industry cycle, Dongxing Securities pointed out that there will be a certain degree of "whip effect" in the semiconductor industry in 2022. After each round of the "whip effect", new technology leaders find new engines to drive industry growth and lead the wave of industry innovation. Since 2023, AI has driven downstream industry demand growth, and it is expected that AI will maintain growth in the medium to long term for 3-5 years. Companies such as NVIDIA on the hardware side will drive computing power growth. It is recommended to continue to pay attention to investment opportunities in the AI related industry chain.
In terms of specific direction, Open Source Securities believes that AI has brought various innovations, and there is a strong demand for supporting links related to short-term computing power servers, and the importance of localization continues to increase. It is recommended to focus on related targets that benefit from the increase in computing power demand; In the long run, it is recommended to pay attention to the application and implementation of AI at the edge. AI terminals with intelligent interaction upgrades are expected to become an important driving force for driving industry demand. We are optimistic about relevant SoC chip manufacturers and ODM and brand manufacturers of related terminals.