Morningstar

Broadcom: Latest in OpenAI’s Deal Spree Adds Fuel to Firm’s AI Growth

We’ve raised our fair value estimate of Broadcom stock.

Broadcom Inc. signage outside the company headquarters.
Aaron M. Sprecher via AP
Securities in This Article
Advanced Micro Devices Inc
(AMD)
Broadcom Inc
(AVGO)
NVIDIA Corp
(NVDA)

Key Morningstar Metrics for Broadcom

On Oct. 13, Broadcom AVGO and OpenAI announced a partnership for sales of custom AI accelerators and Ethernet networking chips to support 10 gigawatts of data center capacity. Broadcom expects deployment to start in the second half of 2026 and run through 2029. Broadcom shares rose 10% intraday.

Why it matters: This massive deal exceeds Advanced Micro Device’s AMD recent agreement with OpenAI for 6 gigawatts of capacity. We think it reflects the immense demand for generative artificial intelligence infrastructure. It also validates Broadcom’s status as a heavyweight rival to Nvidia NVDA in accelerated computing.

  • Generative AI is an immense opportunity for Broadcom as it partners with many major AI model builders. This deal expands the company’s customer base and augments its rapid growth opportunity over the next five years.
  • OpenAI is Broadcom’s fifth custom accelerator customer, after a yet-unnamed fourth customer announced in September. Both of these customers should drive a revenue inflection in 2026 and 2027, on top of the existing customers.

The bottom line: We have raised our fair value estimate for wide-moat Broadcom to $365 per share from $325 as we increase our AI revenue estimates to account for the deal. We expect incremental accelerator and networking revenue to drive stunning growth through 2029. The shares look fairly valued.

  • Broadcom had guided to $10 billion in new revenue in fiscal 2026 from the fourth customer and hinted at an acceleration in fiscal 2027, but we now expect even stronger growth. We expect AI revenue to double to $40 billion in fiscal 2026 and nearly double again in fiscal 2027.
  • We see this as a long-term growth runway for Broadcom. We expect existing customers to expand orders of custom compute and networking chips as they build bigger models. We also expect more customers to come onboard, augmenting Broadcom’s sales.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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