Nvidia hits $4 trillion but JPM is all praise for a different AI chip stock

While Nvidia reached a $4 trillion valuation, JPMorgan analyst Harlan Sur reiterated an "overweight" rating on Broadcom (AVGO) with a $325 price target, citing the company's strong AI-focused custom-chips momentum and a recovering non-AI semiconductor business. Despite AVGO's nearly 90% gain in three months and its projection for AI revenue to reach $50 billion by fiscal year 2027, the stock trades at a premium forward P/E of approximately 50, higher than Nvidia, which contributes to more cautious consensus targets from other Wall Street firms.

Analysis

While Nvidia (NVDA) captures headlines by reaching a $4 trillion market capitalization, a notable bullish call from JPMorgan analyst Harlan Sur shifts focus to Broadcom (AVGO). Sur reiterated an "overweight" rating with a $325 price target, implying approximately 20% upside, following a management meeting that confirmed sustained momentum in its AI-focused custom-chip segment. Critically, the analysis also points to a "gradual U-shaped recovery" in Broadcom's non-AI semiconductor business, with an inflection in bookings that could drive positive EPS revisions next year. This dual-engine growth narrative is further supported by the company's aggressive guidance for AI revenue to reach $50 billion by fiscal 2027, a substantial increase from $12.2 billion in FY 2024. However, this positive outlook is contrasted by significant valuation concerns. After a nearly 90% rally since early April, AVGO trades at a premium forward price-to-earnings multiple of approximately 50, which is considerably higher than many peers, including Nvidia. This elevated valuation contributes to a more restrained Wall Street consensus, with a mean price target of $291 suggesting limited near-term upside of only 5%. The stock's 0.86% dividend yield provides a minor buffer but does not fully mitigate the valuation risk.

Key Decisions for Investors

• Investors aligned with JPMorgan's bullish thesis on custom AI silicon and a cyclical recovery in legacy semiconductors may consider the $325 price target a reason to hold or accumulate positions, despite the recent run-up.
• Given the premium forward P/E multiple of ~50 and a modest consensus price target, risk-averse investors should exercise caution, as significant future growth appears to be priced in, increasing vulnerability to any execution missteps.
• Monitor Broadcom's progress toward its fiscal 2027 AI revenue target of $50 billion and look for confirmation of the recovery in its non-AI business in upcoming earnings reports, as these are the core catalysts required to justify its current valuation.