Bernstein Stays Bullish on Nvidia and Broadcom, Sees 58% and 75% Upside

The semiconductor research team led by chip analyst Stacy Rasgon set a $575 per-share target on Broadcom, nearly 58% above Tuesday's close of $365, and a $400 target on Nvidia, about 75% above its $229 close, according to CNBC.

"We would still own both Nvidia and Broadcom," the analysts wrote in a note. "Both appear to have line of sight for strong growth even in a constrained environment, and both are extremely cheap."

The valuation argument rests on how far the two stocks have fallen relative to their own histories. Nvidia trades at about 17 times next twelve months' earnings per share estimates, against a five-year average of 35 times, while Broadcom trades at 19.7 times forward estimates against a five-year average of 23 times, according to FactSet data cited in the note. The S&P 500's forward price-to-earnings ratio is 19.56 times. Rasgon said those multiples describe unusually cheap pricing for companies growing at these rates, and that they could provide some cushion if AI sentiment weakens, though his team does not expect that to happen.

The analysts pointed instead to multiyear visibility and tight supply and capacity across virtually every component needed for the AI buildout. They wrote that Nvidia has suggested growth of more than 70% off a massive base into 2027, and that Broadcom has suggested potential to double revenue in 2027 and again in 2028, or more.

Nvidia's graphics processing units have long been the industry standard for training AI and running complex models, and the company now designs central processing units as well. Broadcom makes custom chips for specific AI workloads and counts Alphabet's Google, Meta Platforms, Anthropic and OpenAI among customers. Both products fall into the category of AI accelerators.

The ratio of GPUs to CPUs has been narrowing as more advanced systems capable of handling tasks autonomously, known as agentic AI, take hold. Those systems require CPUs and GPUs to work in close coordination, and CPUs are more efficient than GPUs for certain parts of agentic tasks. The launch of Meta's new Muse app for building agents sent investors back into CPU stocks this week, echoing trading seen in the spring when agentic AI adoption began to accelerate.

CNBC's Jim Cramer first bought Arm to play the CPU renaissance but later switched his preference to Intel, which remains one of his favored ways to play the AI compute boom. In addition to its CPU business, Intel's third-party manufacturing and packaging operations support the bull case.

Cramer shares Rasgon's reading of AI demand, a view he made clear last week while a debate ran over an essay by Anthropic CEO Dario Amodei arguing that companies need to collectively pace AI models in the name of safety and that the government should step in with regulation. Cramer interviewed Nvidia CEO Jensen Huang and Broadcom CEO Hock Tan about the paper, and both executives said they do not see demand slowing. Tan said on "Mad Money" that he is not changing his forecasts. Huang said AI companies can take as much time as they need to release safe products, but that no coordinated effort or government intervention is required.

Rasgon's team also spoke last week with a group of chip companies, including Nvidia, Broadcom and Intel. According to Bernstein, the investment implications were that Nvidia's data center opportunity "remains enormous," that Broadcom's "AI trajectory seems set to markedly accelerate" over the next two years, and that at Intel "server strength is helping the company get back on their feet, and narrative/headlines may fuel the vibe for now." Rasgon turning more positive on Intel is significant because he had been down on the stock for years.

Cramer still rates Nvidia a 1-rated buy with a $280 price target, and is more on the fence about Broadcom, holding a hold-equivalent 2 rating with a $430 target. Both targets leave room for upside. The trust halved its Broadcom position in late August to reduce the portfolio's exposure to the AI data center theme in response to growing political pressure; the call booked a large profit, and Broadcom shares have been fairly flat since. Jim Cramer's Charitable Trust is long NVDA, AVGO, INTC, GOOGL and META.