Jim Cramer kept Broadcom in his charitable trust through its recent pullback and into its recovery, holding the position, even as the stock fell more than 10% over the prior month before bouncing back.
On the Sept. 14 episode of “Mad Money,” he called the stock “too cheap to ignore” and said the company was “still on track to put up some incredible growth,” arguing that investors were grouping it unfairly with weaker AI names, TheStreet reported.
Cramer has long held that Broadcom sits in a different category from the speculative AI names, given its actual contracts with paying customers rather than bets on future adoption.
By early October, Broadcom had climbed back to the level where it reported earnings in early September, erasing most of the drawdown for investors who stayed in.
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Broadcom’s Q3 results drove the initial rally
The September report gave investors a lot to work with. Broadcom posted third-quarter revenue of $29.6 billion, up 86% from a year earlier, as AI chip sales tripled.
CEO Hock Tan guided fourth-quarter AI semiconductor revenue to $21.7 billion, up 236% year over year, a figure that made Broadcom one of the largest beneficiaries of the AI build-out outside of Nvidia, according to Broadcom.
The fourth-quarter guidance came in at about $34.8 billion, modestly below the roughly $35 billion analysts had projected. Shares slid about 3% in extended trading on the guidance miss, though they recovered in the following sessions, Nasdaq reported.
That kind of snap-back after a guidance-driven dip suggested the market viewed the miss as a rounding error rather than a signal about demand.
The long-term AI targets underpin Wall Street’s confidence
Broadcom’s broader AI roadmap has kept analysts bullish even through the near-term noise.
The company projected AI revenue of $115 billion in fiscal 2027, rising to $230 billion in fiscal 2028, forecasts that reflect its growing custom chip business with hyperscalers including Alphabet, Meta, and Anthropic, Reuters reported.
Broadcom deepened its relationship with Anthropic in October, agreeing to lend the AI company up to $42 billion to finance chip leases in what Reuters described as an unusual arrangement that made Broadcom both Anthropic’s chip supplier and its financier, Reuters reported.
JP Morgan analyst Harlan Sur raised his price target on Broadcom to $580, the most bullish call among analysts who updated their views after the Q3 report.
Sur asked on the earnings call whether Broadcom’s 18-month AI backlog could reach $200 billion, a figure Hock Tan declined to confirm, though he said the company would “exceed very easily $100 billion” in fiscal 2027, as demand continues to mount, Nasdaq reported.
Analysts are nearly unanimous in their view of Broadcom
Wall Street has maintained its confidence in Broadcom through the volatility. Of 50 analysts covering the stock, 40 rate it a strong buy, with an average 12-month price target of about $527, according to Stock Analysis.
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That consensus reflects a view that Broadcom’s AI revenue ramp is durable, not dependent on a single customer or product cycle.
At about 21 times forward earnings, the stock trades well below Nvidia and closer to the broader market. Some analysts call that a disconnect, given that Broadcom’s profit growth is running at a pace that matches or exceeds what Nvidia is expected to deliver.
Rothschild flags the concentration risk
Not everyone is comfortable with the setup.
Robert Leitao of Rothschild said there is “quite a concentrated bet right now on two companies being able to generate enough revenues to support all the financing that’s happened,” Reuters reported.
This serves as a warning about the reliance of the broader AI infrastructure boom on a handful of hyperscalers. That risk applies directly to Broadcom, whose AI revenue pipeline runs primarily through Alphabet and Meta.
Cramer has pushed back on that concern. The Anthropic financing deal and Broadcom’s chip contracts with other hyperscalers show the customer base is getting broader, he argued, which takes some of the edge off the concentration risk.
What the recovery means for investors who stayed in
Investors who stayed in have gotten back to where they started. Cramer held his charitable trust’s position through the dip because he thought the stock was worth more than the market was pricing it, and a full exit would have left him on the sidelines when sentiment turned.
Getting back to earnings-level pricing also matters technically. When a stock retraces a post-earnings drop, it usually means sellers exhausted themselves and buyers showed up at a price they were willing to own. For Broadcom, that price was tied to the AI revenue story, which never really changed during the pullback.
Where the stock goes from here depends partly on whether Broadcom’s next earnings report backs up the AI revenue trajectory Hock Tan has been laying out. Cramer’s view is that the sell-off had nothing to do with Broadcom specifically; it got caught in a broader pullback across AI names.
Sentiment moves fast in both directions, and a stock at 21 times forward earnings with locked-in hyperscaler contracts is not the same animal as the speculative names that drove the fear.
Related: Broadcom CEO echoes Warren Buffett with warning for investors