Core Insights - The management of Broadcom has indicated a significant and unexpected increase in demand for AI inference, which is currently exceeding existing production capacity, suggesting potential upward revisions in future profitability [1][2][3] - Non-AI business segments are also showing signs of recovery, particularly through VMware's growth, contributing to a multi-faceted growth strategy for the company [1][4] AI Inference Demand - Broadcom's custom AI XPU chip business remains strong, with a clear growth trajectory. The past year saw AI demand primarily focused on training workloads, but a notable surge in inference demand has been observed in the last two months as clients seek to monetize their AI investments [2][3] - The current inference demand is not included in Broadcom's 2027 market size forecast, which estimates $60-90 billion for three existing AI clients, indicating a potential upside opportunity [3] Technological Advancements - Broadcom is collaborating closely with four potential AI XPU clients, aiming to build 1 million XPU AI cluster infrastructures. The company plans to complete the first generation of AI XPU products for two major clients this year [3] - The company is leading the industry transition to next-generation 2nm 3.5D packaging AI XPU architecture, with plans to complete the 2nm 3.5D AI XPU tape-out this year [3] Non-AI Business Recovery - After several quarters of cyclical pressure in non-AI semiconductor businesses, Broadcom is witnessing a gradual "U"-shaped recovery, reflected in current booking and order situations. This recovery may drive positive EPS revisions next year [4] - VMware is leveraging its cloud infrastructure (VCF) platform to provide comprehensive solutions for large enterprise clients, with expected revenue growth to approximately $20 billion annually by 2026/2027 [4] Profitability and Financial Metrics - Despite potential pressure on gross margins from high demand for custom AI XPUs, Broadcom anticipates continued expansion of operating margins due to operational leverage. AI revenue is expected to grow by 60% year-over-year in fiscal 2026, while operating expenses are not expected to increase at the same rate [5] - Key financial estimates for Broadcom include projected revenues of $51.574 billion for FY24, $63.447 billion for FY25, and $76.362 billion for FY26, with adjusted EPS expected to grow from $4.86 in FY24 to $8.38 in FY26 [6] Market Outlook - JPMorgan maintains an "overweight" rating on Broadcom with a target price of $325, representing a 16.9% upside from the current stock price. Broadcom's stock has risen nearly 20% year-to-date [7]