Why Broadcom Stock Was a Winner on Wednesday

An analyst's recommendation upgrade put some lively zip in Broadcom's (NASDAQ: AVGO) stock price on Wednesday. On news of the move, investors eagerly snapped up shares of the hardware and software company, sending its stock price more than 2% higher. That was a steeper climb than the S&P 500's (SNPINDEX: ^GSPC) 0.7% increase on the day.

A simultaneous boost and cut

Well before market open on Hump Day, Daiwa Securities' Louis Miscioscia moved Broadcom up one notch, from outperform to buy. He also changed his price target. Interestingly, this meant a reduction -- it's now $225 per share, against the former level of $275.

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Even at the reduced figure, Miscioscia is anticipating plenty of upsides for the stock -- $225 is nearly 31% higher than Broadcom's Wednesday closing price.

According to reports, the analyst believes Broadcom is standing in front of no less than four elements that could drive its business higher: its custom artificial intelligence (AI) chips, networking, VMWare (an acquisition that closed in late 2023), and its foundational semiconductor products.

Like other tech stocks, Broadcom has suffered from investor fears that the Trump administration's tariffs will badly impact the sector. There are also worries that the AI market might ultimately prove not to be as large as some have anticipated.

Full steam ahead

I share Miscioscia's bullish view of Broadcom, especially when looking at that custom chip business. That alone distinguishes the company from the plethora of businesses looking to profit from the rise of AI, which I think will be extensive, powerful, and long-lasting.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.