Bernstein backs Nvidia, Broadcom growth outlook as AI chip valuations stay compressed

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Bernstein backs Nvidia, Broadcom AI growth

Highlights

Nvidia trades at 17 times forward earnings versus a five-year average of 35, and Broadcom at 19.7 times versus 23, signaling compressed AI chip valuations.
Bernstein maintains outperform ratings and targets of $575 for Broadcom and $400 for Nvidia, citing multiyear growth visibility and company forecasts through 2027–2028.
Strong AI infrastructure demand and supply constraints position Nvidia and Broadcom for continued gains, while market rotation revives interest in CPU-linked names like Intel.

Analyst view on growth and valuation

As reported by CNBC, Bernstein analysts say they would still own both Nvidia and Broadcom, arguing that each company has strong growth visibility despite calls to slow the development of advanced AI models. The note, led by semiconductor analyst Stacy Rasgon, maintains outperform-equivalent ratings on both stocks, with a $575 price target for Broadcom and a $400 price target for Nvidia.

Bernstein argues that the two companies look unusually inexpensive relative to their growth prospects. Nvidia trades at 17 times next 12 months' earnings estimates versus a five-year average of 35 times, while Broadcom trades at 19.7 times forward earnings versus a five-year average of 23 times, according to FactSet. The analysts say those valuations could provide support even if sentiment on AI weakens, although their base case is that demand remains firm.

The team points to multiyear visibility, tight supply and capacity constraints across AI infrastructure components, and company forecasts extending into 2027 and 2028. Bernstein highlights Nvidia's indication of more than 70% growth into 2027 and Broadcom's suggestion that revenue could double in 2027 and again in 2028 or more.

AI infrastructure demand and market rotation

Nvidia remains central to the AI accelerator market through its dominant GPUs, while Broadcom is expanding through custom chips built for specific AI workloads. Broadcom's AI customers include Alphabet's Google, Meta Platforms, Anthropic and OpenAI, underscoring how both companies are positioned across the buildout of data center infrastructure.

The report comes as investors rotate back toward CPU-linked names because of the rise of agentic AI systems, which rely on close coordination between CPUs and GPUs. For some parts of those autonomous tasks, CPUs are more efficient, and that shift is helping revive interest in a different part of the AI chip ecosystem.

Bernstein says recent discussions with Nvidia, Broadcom, Intel and other chip companies reinforce the view that Nvidia's data center opportunity remains enormous and that Broadcom's AI trajectory is set to accelerate markedly over the next two years. The firm also sees improving server demand helping Intel regain footing, adding another dimension to the broader AI compute trade even as Nvidia and Broadcom remain key beneficiaries.

In our earlier article on the S&P 500’s return toward record highs amid an AI-led rotation, we noted that investors were piling back into mega-cap tech and semiconductor-linked names even as market breadth stayed uneven. We also highlighted that the rebound looked like a familiar, narrow leadership rally, with Fed policy pressure and stretched valuations suggesting future upside would need to come more from earnings growth than multiple expansion.

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