Bernstein stays bullish on chip giants

Bernstein's semiconductor team, led by analyst Stacy Rasgon, maintains outperform ratings on both Nvidia and Broadcom despite calls to slow AI development and renewed investor interest in competing chip segments.

“We would still own both Nvidia and Broadcom.”

Price targets signal major upside

Bernstein set a five hundred seventy five dollar price target on Broadcom, implying fifty eight percent upside from Tuesday's three hundred sixty five dollar close, and a four hundred dollar target on Nvidia, representing seventy five percent upside from Tuesday's two hundred twenty nine dollar close.

Valuations look cheap by history

Nvidia trades at seventeen times forward earnings versus its five year average of thirty five times. Broadcom trades at nineteen point seven times forward earnings versus its five year average of twenty three times, both well below the S and P five hundred's nineteen point fifty six times multiple.

“Extremely cheap”

Supply constraints support growth

Bernstein points to multiyear visibility and tight supply and capacity across virtually all components needed for the AI buildout. The team expects Nvidia to grow seventy percent or more off a massive base into twenty twenty seven, and Broadcom to potentially double revenues in twenty twenty seven and again in twenty twenty eight or more.

“NVDA suggesting 70%+ growth off of a massive number into 2027, and AVGO suggesting potential to double revenues in 2027 and again in 2028 or even more.”

Different chips, same AI opportunity

Nvidia designs central processing units and graphics processing units, with GPUs as the industry gold standard for training AI. Broadcom makes custom chips for specific AI workloads and counts Alphabet's Google, Meta Platforms, Anthropic and OpenAI as customers. Both make AI accelerators.

CPU demand rises with agentic AI

The GPU to CPU ratio has narrowed as more advanced AI systems capable of handling tasks autonomously, known as agentic AI, require CPUs and GPUs working in close coordination. For certain agentic tasks, CPUs are more efficient than GPUs, driving renewed investor interest in CPU stocks.

Executives reject calls to slow AI

Last week, Broadcom CEO Hock Tan said on Mad Money he is not changing his forecasts. Nvidia CEO Jensen Huang told Jim that AI companies can take as much time as they need to put out safe products, but there is no need for coordinated effort or government intervention.

Rasgon turns more positive on Intel

Bernstein's recent meetings with chip companies including Nvidia, Broadcom and Intel found that Nvidia's data center opportunity remains enormous, Broadcom's AI trajectory seems set to markedly accelerate in the next two years, and Intel's server strength is helping the company get back on their feet.

Portfolio adjustments reflect caution

Jim Cramer rates Nvidia as a one rated buy with a two hundred eighty dollar price target and Broadcom as a two rated hold with a four hundred thirty dollar price target. The portfolio cut Broadcom in half in late August to reduce exposure to the AI data center theme in response to growing political pressure.