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AVGO - Another Enormous OpenAI partnership. What happens next? Bull case $500 Bear case $250

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October 13, 2025

Broadcom - MASSIVE OpenAI Deal: 10 Gigawatts Custom AI Chips, $245B+ Revenue Potential, Stock Explodes +12%

BROADCOM (AVGO)

🤖🚀 BREAKING: OpenAI Partnership | 10 Gigawatts Custom AI Chips, Multi-Year Deal Through 2029, Stock Ripped +12% Today

October 13, 2025 | OpenAI + Broadcom = Vertical Integration of AI Infrastructure, $60B TTM Revenue, $1.68T Market Cap, Sam Altman Says "Critical Step"

💰 Market Cap: $1.68T | 🏢 Employees: 37,000 | 📊 Debt/Equity: 1.66 (Manageable)
👨‍💼 CEO Hock Tan | 🎯 #1 Custom AI Chip Partner | 🏆 Q3 Revenue $16B (+22%)
$353.96
📈 +$29.33 (+9.04%) Today | +$156.16 (+78.9%) YTD
Current Price (Oct 13)
Price Target Scenarios

18-Month Price Targets (Stock at $353.96 Today)

$500.00
Bull Case (+41%)
AI Dominance
OpenAI Scales
📊 Valuation:
• 2026E EPS: $12.50 × P/E: 40x = $500.00
🚀 What Needs To Happen:
OpenAI deploy ramps fast • 10GW fully contracted • More hyperscaler custom deals • AI revenue $30B+ FY26 • Margins → 65% • VMware exceeds targets • Networking doubles • AGI race accelerates • More OpenAI deals • Nvidia partnership strong • FY26 $90B+ revenue • P/E expands 36x → 40x
$420.00
Base Case (+19%)
Steady Execution
On Track
📊 Valuation:
• 2026E EPS: $10.50 × P/E: 40x = $420.00
⚖️ What Needs To Happen:
OpenAI chips deploy H2 2026 on time • 10GW = $12-15B over 5yrs • AI revenue $22-25B FY26 • Q4 beats • VMware done • 4 custom customers confirmed • Ethernet dominance • Margins 62%+ • FY26 $75-80B • Forward P/E stable 36-40x • Analyst upgrades • Smart money long
$250.00
Bear Case (-29%)
AI Bubble Pops
Delays Hit
📊 Valuation:
• 2026E EPS: $8.00 × P/E: 31x = $248.00
🔻 What Goes Wrong:
OpenAI chip delay → 2027 • Tech issues custom silicon • OpenAI burns cash, cuts orders • AI bubble pops • Hyperscaler capex cuts • Nvidia competition • Margins compress → 55% • VMware fails • Customer concentration (OpenAI 15%+) • Recession kills datacenter • Multiple → 28-32x • De-rates to semi avg
TL;DR - What You Need To Know
🤖
The Partnership Is MASSIVE
10 gigawatts custom AI chips. OpenAI designs, Broadcom builds. Deploy 2026-2029. 1GW = ~$50B. 10GW = $500B+ deal. Multi-year locked revenue.
💰
Why This Changes Everything
800M weekly OpenAI users. Sora growing faster than ChatGPT. Sam Altman: "10GW is just the beginning." OpenAI committed 33GW total (Nvidia, AMD, Oracle, Broadcom) in 3 weeks. Custom chips = lower cost + better performance. Not the mystery $10B Q3 customer - this is NEW.
📈
Why Bulls Are Going Crazy
Stock +12% premarket, +9% close. Q3: $16B revenue +22%. AI revenue $5.2B +63%. 4th chip customer confirmed. Analyst avg $377 (high $420). 26 Buys, 0 Sells. $1.68T market cap. 62% margins. VMware working.
⚠️
Why Bears Are Skeptical
P/E 87x = expensive. Forward P/E 37x still rich. Up 78% YTD. Deploy not til 2026 = risk. OpenAI burning cash. AI bubble fears. Customer concentration if OpenAI = 10-15% revenue. Nvidia competition. Recession kills demand.

🔥 BREAKING: What Just Happened Today

📢 Oct 13 9:00 AM: OpenAI + Broadcom announce 10 gigawatt custom AI accelerator partnership. Multi-year deal through 2029.

🚀 Oct 13 Pre-Market: Stock surged 12% to $365 on the news. Market cap gained $160B+ in minutes.

💬 Sam Altman: "Partnering with Broadcom is critical step in building infrastructure to unlock AI's potential."

💡 Hock Tan (CEO): "Pivotal moment in pursuit of AGI. Thrilled to deploy 10GW of next-gen accelerators."

📊 Market Reaction: Analysts scrambling to update models. Wall Street believes this validates Broadcom's AI dominance story.

📊 What The OpenAI Deal Means: Breaking It Down

Biggest custom chip deal ever. OpenAI designs silicon for their models. Broadcom manufactures + Ethernet networking. 10GW = power a large city. Deploy starts H2 2026. 1GW datacenter = $35B in chips. Custom = cheaper + faster. Broadcom positioned for $50-100B+ revenue over 4 years.

⚡
10 GW
AI Accelerators
Largest Deal Ever
🏭
H2 2026
First Deployment
Through End 2029
🔌
Ethernet
Networking Tech
Broadcom Dominance
🎯
800M
OpenAI Users
Weekly Active

📞 Key Deal Highlights & Market Reaction

🤝
OpenAI Designs, Broadcom Builds
OpenAI custom chips for GPT, Sora, etc. AI learnings in silicon = better perf, lower cost. Broadcom builds chips + Ethernet. Full optimized racks. Deploy H2 2026.
💡
Why Custom Chips Matter
Nvidia H100/H200 = $25-40K per chip. Custom 30-50% cheaper + better for specific workloads. 10GW at Nvidia pricing = $350B. Custom could save OpenAI $100B+ over 5 years. Efficiency gains huge.
📡
Broadcom's Ethernet Dominance
AI datacenters need massive networking. Broadcom owns Ethernet switches. OpenAI using Ethernet (not InfiniBand). Just launched Tomahawk 6 (102.4 Tbps). Networking = $5-10B alone. Complete solution.
🚀
The Broader AI Arms Race
Last 3 weeks: OpenAI announced 33GW deals (Nvidia $100B, AMD 6GW, Oracle, Broadcom 10GW). Racing to AGI. Custom chips = Google TPUs, Amazon Trainium, Microsoft Maia. OpenAI cutting Nvidia dependence. Broadcom positioned with ALL hyperscalers.

🎤 Sam Altman: "10GW vastly more than world has today, but we'll absorb it super fast." Translation: OpenAI scaling 5x from 2GW. Sees infinite AI demand.

📊 Financial Impact: Q3 AI revenue $5.2B (+63%). CEO: Q4 AI hits $6.2B. OpenAI deal could add $3-5B annually from 2026. Analysts updating models to $25B+ AI revenue FY26 vs $20B prior.

🔍 NOT The Mystery Customer: Q3: Broadcom announced 4th customer with $10B orders. Today exec confirmed: OpenAI NOT that customer. This 10GW deal = ADDITIONAL. Bulls loving it.

🎯 What's Next: Deploy H2 2026-2029. 18mo partnership already. Watch for: silicon tapeout, production ramps, more hyperscaler deals, AI guidance raises. Smart money betting Broadcom = THE custom AI partner. Stock could re-rate 37x → 45x forward P/E if execution works.

🚀 Why AVGO Bulls Are Euphoric Right Now
👑
Broadcom = AI Infrastructure King
Deal confirms Broadcom = THE custom AI chip partner. Google, Meta, OpenAI confirmed. 4th likely Microsoft/Apple. Custom = higher margins, sticky contracts. Playing both sides: custom chips + Nvidia networking. Toll booth on AI revolution.
💰
Revenue Visibility Through 2029
Multi-year = predictable revenue. OpenAI through 2029. Google/Meta multi-year. Not spot orders. 10GW over 4yrs = $50-100B+ from this alone. Q3 $5.2B AI revenue = $20B+ run rate. Could hit $30B+ by FY27. TAM $60-90B by FY27.
📊
Margins Are Expanding
Q3 gross margin 62%. VMware = software margins 70%+. Custom chips fabless = 60%+ margins. As AI scales to $25B+, op margins → 65%. $80B FY26 revenue × 65% = $52B op income. $1.68T ÷ $52B = 32x. If margins expand, multiple re-rates higher.
🎯
Analyst Upgrades Coming
Consensus $377 (high $420). Today's news = upgrades coming. Many at $350-370 will revise to $400-450. KeyBanc already $420. If AI hits $25B FY26 + margins expand, fair value $450-500. 37x forward now. Growth = 40-45x justified. $450-500 in 12-18mo.
🐻 Why AVGO Bears Are Skeptical (Valid Concerns)
💸
Valuation Is Stretched
Trailing P/E 87x. Forward P/E 37x vs semi avg 25x. Up 78% YTD. $1.68T = #7 globally. Perfection priced. Any miss = 20-30% drop. Nvidia similar multiple, grows faster. Worth $1.68T?
⏰
Execution Risk Is MASSIVE
Deploy H2 2026 = 20+ months out. Chip design fails happen. Yields disappoint. Timelines slip (common in semis). First silicon doesn't work = stock -30%. Custom chips HARD. Google 8+ years. OpenAI/Broadcom starting fresh. What if perf disappoints vs Nvidia?
🫧
AI Bubble Fears Are Real
What if AI demand craters? OpenAI burning billions, not profitable. Altman raising everywhere (33GW = hundreds of billions capex). If OpenAI can't monetize, cancel orders. Market worried about AI ROI. 2026 recession = hyperscalers cut capex, Broadcom tanks. $1.68T assumes infinite AI scaling. Bubbles always pop.
🎯
Customer Concentration Risk
If OpenAI = 10-15% revenue by 2027, huge risk. What if OpenAI fails? Gets bought? Pivots? Develops in-house manufacturing? Hyperscalers fickle. Amazon buying Marvell. Meta in-house. Broadcom has pricing power today, but customers always cut costs and insource.

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.