Broadcom’s Grand Illusion

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It has become a commonplace spectacle, this relentless pursuit of valuation. Once, a trillion dollars represented a kingdom; now, it is merely a stepping stone, a bauble for the titans of industry. We observe, with a jaded eye, that Nvidia, Alphabet, Apple, and Microsoft have already ascended to this gilded height. A most exclusive club, indeed, though one apparently eager to admit new members, if the current theatrical production unfolding at Broadcom is to be believed.

Our subject, Broadcom, presently valued at a respectable, though hardly regal, $1.7 trillion, aspires to join this select company. A feat requiring, shall we say, a rather ambitious performance – a 77% increase in its stock price by the year 2026. One might inquire: is this a realistic expectation, or merely a grand illusion, a puffery designed to entice the gullible investor? Let us, with a touch of skeptical amusement, examine the script.

The Alchemist’s Workshop

Broadcom, it appears, is engaged in a transformation, attempting to transmute base metals into gold. Historically, a purveyor of sundry technological components – mainframe software, connectivity solutions, the usual – it now focuses its energies upon a singular, glittering prize: custom AI accelerator chips. A most clever maneuver, to be sure. Instead of crafting a general-purpose tool, like some humble artisan, Broadcom offers bespoke solutions to the leading artificers of artificial intelligence.

These “ASICs,” as they are known, are not entirely novel, mind you. They have existed for some time, serving specific, limited functions. But Broadcom, with a shrewdness that borders on the Machiavellian, has cornered the market in AI-focused hardware. It is a master of specialization, a purveyor of bespoke extravagance.

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The principle is simple, yet elegant: a chip designed for a specific task performs that task with greater speed and efficiency. Google’s Tensor Processing Unit, a creation of Broadcom’s hand, exemplifies this principle. It will not, of course, entirely supplant the general-purpose GPU, but it will certainly enhance the computing strategy of any AI “hyperscaler” with a taste for the finer things.

OpenAI, the creators of the ubiquitous ChatGPT, are also among Broadcom’s clientele. The demand for these specialized chips is, therefore, booming. And Broadcom, ever the astute entrepreneur, is positioning itself to be the principal beneficiary. Indeed, its AI semiconductor business accounted for a remarkable $6.5 billion in revenue during the fourth quarter of fiscal 2025 – a third of its total earnings. A most pleasing development, one might say.

Management confidently predicts that this segment will grow to $8.2 billion in the first quarter of 2026, becoming the company’s largest source of revenue. A bold prediction, to be sure, but one that, given the current climate of technological fervor, is not entirely implausible.

The Price of Vanity

Wall Street analysts, those ever-optimistic soothsayers, project a 51% revenue increase for fiscal 2026, with earnings per share rising to $10.14. A successful year, undoubtedly. But will it be sufficient to propel Broadcom into the $3 trillion club? That, my friends, is the question.

A 77% increase in stock price would bring the value of each share to $623. At that price, Broadcom would trade at 61 times its trailing earnings. Not inexpensive, to be sure. However, its shares already command a multiple of 74. Therefore, if the company delivers on its earnings projections and its valuation experiences even a modest decrease, the $3 trillion mark is, theoretically, within reach.

It will not be easy, of course. But it is, dare we say, entirely doable. And even if Broadcom falls short of this lofty goal, the potential for a successful investment remains. For in the grand theater of the market, even a near miss can be a profitable performance. One must simply be prepared to applaud the illusion, even as one recognizes the artifice beneath.

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2026-01-17 01:03