Long-term growth trend in AI business is strong + diversified business model! JP Morgan reiterates Broadcom Inc. (AVGO.US) as top semiconductor stock.

JP Morgan recently released a research report stating that Broadcom Inc. (AVGO.US) remains the preferred investment target in the semiconductor field, due to its diversified business model, top-notch profit margins, and strong long-term growth trends in artificial intelligence (AI)/data centers and infrastructure. The firm reiterated its "overweight" rating for Broadcom Inc., with a target price of $400 by December 2026. This target price represents a potential 16% increase from Broadcom Inc.'s closing price of $346.17 on Wednesday. JP Morgan recently invited Broadcom Inc.'s Chief Financial Officer Kirsten Spears to attend a meeting in London, where discussions focused on the robust AI demand trends that are driving strong growth in Broadcom Inc.'s customized AI XPU business and high-performance network product demand. Furthermore, signs of recovery in non-AI semiconductor business are emerging (expected to drive growth next year), and continuous growth is still seen in the VMware business. Key points derived from this discussion, according to JP Morgan, include: 1) Strong AI demand continues, with Broadcom Inc.'s team making progress in various potential collaborations as expected, and having confidence that these customers will transition towards million-level XPU AI clusters in the future. 2) If CEO Hock Tan increases AI revenue to $120 billion by 2030, incentives related to his recent employment contract will reach maximum value, as the team has consistently exceeded targets in the past. 3) Broadcom Inc.'s team continues to demonstrate strong execution in product technology development, and is expected to complete the first 2nm/3.5D packaged AI XPU product with a potential customer this year, establishing a position as a technology leaderpossibly ahead of independent GPU peers. 4) The Broadcom Inc. team is moving up towards higher levels, not just delivering chips but providing complete AI rack-level deployments to customers. Despite lower profit margins due to cost transfer, gross profit and total operating profit are increasing. 5) Strong growth opportunities exist in scale-up, scale-out, and scale-across networks, with Ethernet structures remaining the preferred technology architecture. 6) Non-AI business order volume is on the rise, with signs of recovery in broadband, server storage, and enterprise networking. However, revenue recovery follows a "U-shaped" pattern, with the potential to accelerate after entering the 2026 fiscal year. 7) The Broadcom Inc. team expects the completion of the VMware VCF platform transition by the end of the 2026 fiscal year (meaning its revenue will continue to maintain strong double-digit year-on-year growth). Subsequently, infrastructure software growth is expected to return to mid to high single-digit percentages. Looking ahead, the Broadcom Inc. team will focus on reinvesting in the business, particularly in large AI growth opportunities, while continuing to return 50% of free cash flow and prioritizing debt repayment. In conclusion, JP Morgan states that Broadcom Inc. is a leader in wireless, data center networks, AI/deep learning ASIC, storage and infrastructure silicon, hardware, and software, with broad exposure to positive trends in these terminal markets. Broadcom Inc. is a powerhouse in the technology infrastructure field, with unparalleled scale and technological capabilities in the industry, ensuring its leading position in diverse terminal markets.