Broadcom Stock: HSBC Sets $400 Target on AI Growth Potential

Core Viewpoint - HSBC has issued a bullish price target of $400 for Broadcom, suggesting a potential upside of 44% from its recent closing price of approximately $278 [1][2]. Group 1: Revenue Drivers - HSBC anticipates an increase in Broadcom's AI hyperscale customers, projecting up to seven customers for its application-specific integrated circuits (ASICs) by fiscal year 2027, up from the current three [2]. - The average selling price of Broadcom's ASICs is expected to more than double by fiscal 2027, contributing significantly to revenue growth [3]. Group 2: Analyst Sentiment - While HSBC's price target is the most optimistic on Wall Street, the next highest target is $340 from Rosenblatt Securities, indicating a more moderate upside of 22% [4]. - The MarketBeat consensus price target for Broadcom is $285, suggesting limited upside of less than 3% [5]. Group 3: Valuation and Risks - Broadcom's forward P/E ratio is currently over 38x, close to its three-year high of 40x, which raises concerns about valuation [7]. - The company’s high valuation may lead investors to expect quicker results in customer conversions, with updates on potential hyperscale customers not expected until fiscal 2026 [11]. - HSBC projects a 32x multiple for Broadcom, implying a potential contraction of 16% from current levels, necessitating significant earnings growth to meet the price target [10].