Key Takeaways
- Analyst Stacy Rasgon from Bernstein assigns ‘outperform’ ratings to Broadcom (AVGO) and Nvidia (NVDA) while holding positions in both
- Broadcom (AVGO) shares climbed 4.7% following Rasgon’s optimistic assessment of AI semiconductor stocks
- Rasgon believes both companies could reach valuations around 15x forward earnings, indicating potential gains
- AMD (AMD) receives a more reserved outlook from Bernstein pending stronger evidence of genuine customer traction
- Intense AI infrastructure buildout is creating memory supply constraints and elevating component pricing
Bernstein’s Stacy Rasgon issued an optimistic assessment of AI semiconductor stocks on Monday, triggering a 4.7% surge in Broadcom shares during early market hours. Rasgon assigned ‘outperform’ ratings to both Broadcom and Nvidia while disclosing that Bernstein maintains equity positions in these firms.
According to Rasgon, artificial intelligence demand “exhibits no indication of deceleration at present.” He characterized Broadcom’s current market valuation as “remarkably compelling” considering the company’s expansion prospects.
Broadcom’s most recent quarterly results showed revenue growth of 16%, while earnings skyrocketed 173%. The stock has retreated approximately 22% from its December 2024 peak of $413 per share.
Trading near $324 per share, Broadcom carries a trailing price-to-earnings ratio of approximately 60. Rasgon anticipates earnings per share reaching $20 or higher by 2027, which would translate to a forward multiple below 16 times.
This projection implies earnings expansion of roughly 400% across a two-year period—approximately 100% annual growth. Rasgon suggested that Wall Street consensus estimates for both Broadcom and Nvidia might still underestimate actual performance.
Bernstein Distinguishes Between Nvidia, Broadcom and AMD
Bernstein establishes distinct separation between semiconductor stocks it recommends and those it does not. Nvidia and Broadcom receive endorsements, while Advanced Micro Devices receives a more measured stance.
Rasgon noted AMD has recovered from recent price troughs. However, Bernstein seeks stronger confirmation that enterprises are purchasing AMD processors based on authentic need rather than simply because alternatives face supply limitations.
Absent more definitive proof of sustainable momentum, Bernstein indicates it prefers maintaining a neutral position on AMD. The firm stops short of issuing a sell recommendation but refrains from advocating purchases.
Memory Supply Constraints Emerge as AI Infrastructure Expands
Robust artificial intelligence infrastructure investment is generating complications in adjacent technology sectors. Accelerating data center construction is constraining memory availability and driving component costs upward.
Markets including personal computers and mobile devices are experiencing pressure as data center operators consume greater capacity. Escalating input costs are beginning to compress profit margins throughout segments of the technology industry.
Rasgon recognized these market dynamics but emphasized they do not alter his perspective on Nvidia or Broadcom. Both organizations remain strategically positioned in his assessment, with fundamental demand patterns continuing unchanged.
Bernstein disclosed ownership stakes in both Nvidia and Broadcom as of its research publication Monday, March 24.
