Broadcom Is a Bellwether for Chips. Earnings Will Be Focused on AI.

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Chip investors are eagerly awaiting the latest results from semiconductor bellwether

Broadcom

after the market close to get an update on its businesses and progress in the artificial intelligence market.

Some of the company’s chips have exposure to generative AI systems, which has been a popular investment theme this year. The technology ingests text, images, and videos in a brute-force manner to create content. Interest in this form of AI was sparked by OpenAI’s release of ChatGPT late last year.

Broadcom’s semiconductors are in a number of categories, including networking, broadband, server storage, wireless and industrial. Due to the broad-based nature of its end markets, it can be seen as an indicator for the rest of the industry.

For the quarter ended in April, Wall Street expects

Broadcom

(ticker: AVGO) to report $8.7 billion in revenue, or up about 7% year over year, with adjusted earnings of $10.12 a share. For the current quarter, analysts expect Broadcom to offer guidance of $8.72 billion in revenue and $10.17 in adjusted EPS.

Earlier this week, KeyBanc Capital Markets analyst John Vinh raised his price target on Broadcom shares to $820 from $720 and maintained his Overweight rating. Shares closed Wednesday just shy of $807.

The analyst said he predicts Broadcom’s numbers will be in line or slightly higher than expectations. He also said investors will be focused on its chip order backlog for the area of AI.

“Despite signs of normalizing supply, backlog coverage and still-long lead times are expected to support [Broadcom’s] results/outlook, coupled with generative AI and the renewal of

Apple
’s
long-term agreement,” Vinh wrote.

On its earnings call, Broadcom might also share more details of its supplier deal with Apple. Last week, Apple (AAPL) announced a new multiyear, multibillion-dollar agreement with Broadcom to make 5G radio frequency components and wireless chips.

Broadcom shares are up 41% over the past 12 months, compared with the 13% rise for the

iShares Semiconductor exchange-traded fund

(SOXX), which tracks the performance of the ICE Semiconductor Index.

Write to Tae Kim at tae.kim@barrons.com