Broadcom stock spikes, on pace for best day in a year

Broadcom shares jumped about 9% Monday after Citigroup resumed its coverage of the stock with a buy rating and updated its price target to $1,100. Shares are currently trading around $1,034.

Citigroup said it resumed its coverage of the semiconductor and software company in a note to investors Monday morning, citing “strength in the core business and accretion from the VMware acquisition.” Broadcom bought VMware in November to bolster its cloud technology infrastructure that it sells to other businesses.

Broadcom is one of many companies looking to profit off the artificial intelligence boom, and has teamed up with companies such as Google and Comcast to design and build chips and other infrastructure for certain AI applications, including Google’s custom tensor processing unit. However, it’s not competitive with Nvidia in providing the GPUs used to train cutting-edge generative AI models like those that power OpenAI’s GPT.

Citigroup’s bullishness is largely because it believes Broadcom is well-positioned to earn money from the AI boom.

“We expect sales from AI infrastructure to double from $4 billion in F23 (11% of F23 sales) to over $8 billion in F24 (17% in F24 sales),” the analysts wrote.

Broadcom reported solid earnings for its fiscal fourth quarter last Thursday, which gave its shares a 2.4% boost to $944.30 at Friday’s market close.

— CNBC’s Michael Bloom contributed to this report.