On Tuesday (18th) local time, Nvidia topped the global market value list, achieving the milestone of 3 trillion USD in just three weeks and leaping from third to first place. Following the release of the AI giant's financial report, a plethora of industry benefits emerged, and the chip industry also took the first place in terms of weight in the S&P index for the first time, with seven chip companies surpassing a market value of 200 billion USD.
Recently, two companies are standing out. Broadcom has become the second chip stock to enter the top ten market value in the US stock market, and Micron Technology, which is about to release its performance, is also highly anticipated by the market.
AI revenue surge boosts Broadcom's skyrocketing
During Tuesday's trading, Broadcom once surpassed Eli Lilly and Company to become the ninth most valuable company in the world.
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According to Dow Jones Market Data, the chip company's market value has also benefited from the AI boom. A year ago, Broadcom was the 16th largest company in the S&P 500 index. Last Thursday (13th), its market value broke through 700 billion USD for the first time, and the next day it crossed the threshold of 800 billion USD.
The latest financial report is undoubtedly a booster. The company's revenue for the second fiscal quarter of 2024 was 12.49 billion USD, a 43% increase from the same period last year. Broadcom CEO Hock Tan said: "The performance of the second quarter was once again driven by artificial intelligence demand and VMware." He added, "Our AI product revenue reached a record 3.1 billion USD this quarter."
Subsequently, Broadcom's stock price soared by more than 30%. Melius Research analyst Ben Reitzes wrote in a report to clients: "(Broadcom) the growth of artificial intelligence and software revenue is good, and as key customers increase their artificial intelligence (capital expenditure) forecasts, performance is expected to be further released."
Although Broadcom has raised its AI revenue forecast for this fiscal year by more than 1 billion USD, Reitzes believes that the new target still seems very conservative. "There may be a lot of room for upward guidance, and it remains the main number that investors care about. We are very clear that key customers such as Meta and Google are shifting more spending to accelerators and Ethernet-based clusters."
Evercore ISI analyst Mark Lipacis also tends to believe that the guidance does not reflect expectations. "Broadcom is adding two new custom AI customers, which seems to give it excellent mid-term visibility for AI-driven revenue on the processor side, and at the same time, its Ethernet solutions also seem to have gained attractiveness in AI data centers." At the same time, in terms of integrating VMware into the business, the company is doing better than expected, looking for better revenue and cost synergies than previously announced. Lipacis raised the target price of Broadcom's stock from 1620 USD to 2010 USD, rated as outperforming the market.
Jefferies analyst Blayne Curtis believes that as the adaptability of the business direction adjustment is gradually completed, Broadcom should benefit from the continuous growth of artificial intelligence and the cyclical recovery of other industries. In addition, the company will carry out a 1-for-10 stock split in July, which is expected to be welcomed by the market. He rated the stock as a buy, with a new target of 2050 USD, higher than the previous 1550 USD.Micron Technology's Earnings Report Anticipated Positively
Micron Technology has been another hot topic in the market recently, with its stock price rising in seven out of the last eight trading days, gaining approximately 18% during this period, and accumulating an increase of over 80% so far this year.
According to the schedule announced by the exchange, Micron is set to release its earnings report next Wednesday (the 26th), and investors' optimism for the upcoming earnings report is growing day by day.
In a report, Mizuho Technology analyst Jordan Klein wrote that the upcoming earnings performance of Micron feels more like a positive catalyst. This is because he anticipates that executives will spare no effort in discussing the improvement in demand, the tightness in industry supply, further increases in pricing, and the leadership in high bandwidth memory (HBM DRAM), "with investors having a fear of missing out (FOMO) mentality."
Media reports, citing informed sources, state that Micron Technology is accelerating the construction of an advanced HBM testing production line in the United States and considering the production of HBM in Malaysia for the first time, in order to capture more demand driven by the artificial intelligence boom.
Wedbush analyst Matt Bryson is also optimistic about the extent to which Micron will ultimately benefit from pricing. He expects Micron's average selling price, revenue, profit margins, and earnings per share to "rise significantly," and has raised the target price from $130 to $170. "We anticipate that the financial situation for Micron will only have positive news for the foreseeable future, until we see a change in the industry's investment plans (given the depth of the recent economic downturn, industry participants are focused on profitability, and we believe the likelihood of changes in the short term is limited)."
Stifel analyst Brian Chin is optimistic about Micron's HBM3E product. "The demand for HBM driven by artificial intelligence remains the main catalyst, allowing Micron to further consolidate pricing power, optimize its portfolio, and focus on enhancing HBM3E." He anticipates that Micron will achieve qualification for its 12 Hi HBM3E on Nvidia's B200 platform by the end of the year, with the current price being a reasonable valuation for the growth prospects of the artificial intelligence industry.
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