HSBC: There could be much more upside to Broadcom's AI backlog

Core Viewpoint - The order backlog of $73 billion is seen as bullish for the company, with potential for further upside despite some investor skepticism [1][3]. Order Backlog and Future Projections - The annualized backlog suggests nearly $50 billion for the next year, exceeding the sell-side consensus of $38 billion [2][3]. - The backlog is considered a minimum, indicating potential for further increases in the coming months [3]. AI Networking and Customer Orders - AI networking is highlighted as a significant growth theme, with expectations of around $13 billion from this segment next year, surpassing most analysts' estimates [3][4]. - The company has secured additional orders from its fourth customer, Anthropic, and a potential fifth unnamed customer, speculated to be Microsoft, which could represent a substantial order [5][6]. Supply Chain and Production Capacity - Positive supply chain developments from TSMC have contributed to bullish sentiment, with significant upward revisions in TSMC's order capacity noted [7]. Competitive Landscape and Market Position - Concerns exist regarding customer tooling, where clients may develop their own chips, potentially impacting Broadcom [7]. - Despite competition from MediaTek's TPU project with Google, Broadcom is expected to ship over 3 million units next year, significantly outpacing MediaTek's projected couple hundred thousand units [9]. Valuation and Market Sentiment - Broadcom's valuation is approximately 45-46 times forward earnings, which is a premium compared to Nvidia, leading to discussions about investor reactions to valuation post-earnings report [11][12]. - The earnings outlook suggests that valuations may appear less expensive in the future as earnings are expected to rise, and Broadcom's customer profile may justify a higher multiple compared to Nvidia [12][13][14].