HSBC Upgrades Broadcom to Buy, Citing Accelerated AI ASIC Growth

Publication Date: June 24, 2025

Broadcom (NASDAQ:AVGO) shares experienced a notable surge of over 3% during intra-day trading today, following a significant upgrade from HSBC. The investment bank elevated Broadcom's rating from 'Hold' to 'Buy' and concurrently raised its price target to $400. This bullish revision is primarily driven by a sharply improved outlook for Broadcom's custom Application-Specific Integrated Circuit (ASIC) business, fueled by the accelerating global investment in AI infrastructure.

Underestimated Potential in AI ASICs

Following Broadcom's Q2 2025 earnings call, market consensus estimates for ASIC revenue in both 2026 and 2027 saw substantial upward revisions. However, HSBC contends that even these optimistic projections still fall short of capturing the full extent of Broadcom's potential in this rapidly expanding sector. The firm anticipates that Broadcom's ASIC revenue will outpace the growth of the broader AI GPU market significantly. This accelerated growth is expected to be propelled by a substantial increase in hyperscaler investment in custom silicon, with projected capital expenditure on custom ASICs rising from a mere 2% of AI server capex in 2023 to an estimated 14% by 2027.

Rising ASIC Die Sizes and Average Selling Prices

HSBC further highlights a discernible trend towards larger ASIC die sizes. These larger dies command considerably higher prices, contributing to an upward trajectory in average selling prices. As a direct consequence of this trend, HSBC now forecasts that blended average selling prices for ASICs will climb by an impressive 92% year-over-year in 2026, followed by an additional 25% increase in 2027.

HSBC's Aggressive Revenue Projections

Reflecting its highly optimistic view, HSBC has dramatically increased its own ASIC revenue projections for Broadcom:

• 2026: $28.4 billion (42% above current Street estimates)
• 2027: $42.8 billion (69% above current Street estimates)

These revised figures underscore HSBC's conviction that Broadcom is exceptionally well-positioned to capitalize on the burgeoning demand for custom AI silicon.

Valuation and Upgrade Rationale

Given the immense potential identified in Broadcom's AI-driven ASIC growth, HSBC believes that the company's current market valuation does not adequately reflect the magnitude of this opportunity. This perceived undervaluation, coupled with the robust growth prospects, served as the primary impetus for the upgrade to a 'Buy' rating and the more aggressive price target. The upgrade signals strong analyst confidence in Broadcom's strategic positioning and its ability to significantly benefit from the ongoing AI revolution.