Wolfe Research has moved Broadcom Inc (NASDAQ:AVGO) to an Outperform rating and placed a $400 price target on the stock, citing heightened conviction about the scale and competitiveness of Google's tensor processing unit - TPU - program and Broadcom's role as a principal beneficiary.
The upgrade follows proprietary channel checks that indicate TPU shipments could expand to roughly 7 million units per year by calendar 2028, a level Wolfe said it can no longer ignore. The firm believes Google's decision to make TPUs available to third parties creates a credible alternative to Nvidia's GPUs, and projects Broadcom will capture a significant share of the custom silicon demand associated with that shift.
On the back of these assumptions, Wolfe raised its calendar 2027 estimates to $154.5 billion in revenue and $16.00 in earnings per share, reflecting higher assumed TPU volumes and stronger AI-related contributions. The firm also noted there is additional upside potential from other custom accelerator programs that are not fully captured in its forecasts, including initiatives tied to Meta and OpenAI.
Wolfe provided more granular AI ASIC modeling for the nearer term. For calendar 2026, it raised its AI ASIC revenue estimate to about $44.0 billion, based on an assumed shipment level of approximately 3.3 million TPUs. For calendar 2027, Wolfe lifted its AI revenue estimate to $78.4 billion, on an assumed shipment volume of roughly 5.1 million units.
The research house expects TPUs to be the primary driver of Broadcom's XPU growth. It estimated that other custom accelerator programs would account for about 17% of XPU revenue in 2026 and approximately 14% in 2027, with TPUs making up the balance.
Wolfe's modeling also incorporated a notable increase in networking revenue. The firm forecast networking revenue of $15.1 billion in 2026 - an increase of about 75% year over year - and projected AI-related networking revenue growth of roughly 55% in 2027. Estimates for non-AI semiconductors and for infrastructure software were left unchanged in Wolfe's update.
Wolfe said its $400 price target corresponds to about 22 times a bull-case earnings scenario of $18.00 per share in 2027. That $18 EPS assumption requires Broadcom to double AI revenue again in 2027 relative to the firms modeled levels. Wolfe noted the 22x multiple sits below the stock's approximate three-year average of 25 times, a range that it said covers the AI spending cycle.
Bottom line: Wolfe Research raised its outlook and price target on Broadcom following stronger-than-expected signals on TPU adoption and related AI demand. The upgrade incorporates higher AI ASIC and networking revenue assumptions for 2026 and 2027 while acknowledging there may be further upside from other custom accelerator programs.