Broadcom Inc. (NASDAQ: AVGO) is not only holding its position in the datacenter and AI Ethernet switching market but is also making significant strides forward. With its stock currently trading at $1,735.04, Broadcom is expected to achieve notable gains, targeting a price of $2,000 by December, according to JPMorgan.
Dominating With 80% Market Share
According to analyst Harlan Sur of JPMorgan, Broadcom holds a commanding 80% market share in the $5-7 billion datacenter/AI Ethernet switching and routing chipset market. This dominance is largely due to its relentless innovation. Sur highlights the company's flagship Tomahawk series, which has consistently doubled performance every two years. The team continues to drive "a 2x Moore's Law like performance boost with its Tomahawk switching chipset," said Sur.
Broadcom's lead is not just about performance. Sur points out that the company is ahead of competitors like Nvidia Corp (NASDAQ: NVDA), Marvell Technology Inc (NASDAQ: MRVL) and Cisco Systems Inc (NASDAQ: CSCO) in delivering cutting-edge networking silicon. "We believe 9-12 months ahead of NVIDIA and 12monthts+ ahead of Marvell and Cisco," the analyst said.
This lead is fortified by Broadcom's robust R&D scale and intellectual property, creating significant barriers to entry for competitors.
Next-Gen Marvel: Tomahawk 6
Sur notes that Broadcom will ship initial Tomahawk 6 chipsets in the second half of 2024, with full production ramping in 2025 and 2026. This 3nm chipset boasts a staggering 102.4Tbps switching throughput and 1.6Tbps optical connectivity.
Such capabilities are critical for supporting the next generation of AI clusters, which include major players like Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Amazon.com Inc (NASDAQ: AMZN), Meta Platforms Inc (NASDAQ: META), Alibaba Group Holding Limited (NYSE: BABA), Oracle Corp (NASDAQ: ORCL), ByteDance, and Tencent Holdings Ltd (OTC: TCEHY).
Sur expects Broadcom's AI networking silicon revenues to triple to over $3 billion in 2024, with a 50% growth projection for 2025. The 800Gbps optical upgrade cycle currently underway, along with the upcoming 1.6Tbps cycle starting with the Tomahawk 6 ramp, drives this surge.
'Two Steps Ahead Of Its Competitors'
Broadcom's roadmap extends beyond the Tomahawk 6. Sur mentions that the company is already in the design phase of its 2nm Tomahawk 7, ensuring it remains "one/two steps ahead of its competitors."
As the cloud and hyperscale datacenter market grows at a projected 20-30% CAGR, Broadcom is well-positioned to retain its market leadership.
Broadcom's relentless innovation and strategic foresight make it a standout in the rapidly evolving AI and datacenter networking landscape. Investors should take note of this powerhouse as it continues to shape the future of technology.