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Semiconductors are the lifeblood of modern innovation, driving everything from everyday smartphones to the world’s most advanced supercomputers. Over the past year, the industry has witnessed a monumental transformation, propelled by the explosive rise of artificial intelligence (AI). This AI-driven surge has created an insatiable demand for cutting-edge chips, reshaping the global technology landscape.
According to the World Semiconductor Trade Statistics (WSTS) organization, the sector is on track for 19% year-over-year growth by the end of this year, with global sales projected to hit a stunning $626.9 billion. But the growth story doesn’t end there. The year 2025 is forecast to deliver another leap forward with an 11.2% increase, bringing total sales to a staggering $697.2 billion.
This unstoppable momentum underscores the semiconductor industry’s pivotal role in powering the future of technology. Having said that, chip powerhouse Nvidia (NVDA) has undoubtedly been the crown jewel of the AI boom, capturing the spotlight with its groundbreaking GPUs, but it isn’t the only name in town.
Joining Nvidia at the forefront of the semiconductor boom, Bernstein analyst Stacy Rasgon recently highlighted two other chip giants, Broadcom Inc. (AVGO) and Qualcomm Incorporated (QCOM), as top contenders for 2025. With soaring demand for AI chips and smartphone semiconductors, Rasgon believes these two tech leaders are set to dominate the rapidly evolving landscape alongside Nvidia. Thus, here's a closer look at AVGO and QCOM.
Chip Stock #1: Broadcom
Based in Palo Alto, Broadcom Inc. (AVGO) is a global technology powerhouse renowned for its wide-ranging portfolio of semiconductors, enterprise software, and security solutions. With a focus on critical markets such as cloud, data centers, networking, wireless, and storage, Broadcom’s innovative products are at the heart of industries driving the future. From mobile connectivity and broadband to enterprise networking, cybersecurity, and private cloud infrastructure, Broadcom delivers cutting-edge solutions that power everything from industrial operations to global digital transformation.
Commanding a massive market cap of approximately $1.1 trillion, shares of Broadcom have rallied a stunning 110% over the past year, far outpacing the broader S&P 500 Index’s ($SPX) 24% annual return. In fact, the stock has soared an astounding 46% over the past month alone.
Apart from its stellar price action, Broadcom continues to impress investors with its unwavering commitment to rewarding shareholders, boasting 15 consecutive years of dividend increases and a hefty 37.19% payout ratio. In its latest earnings release, the company declared a quarterly dividend of $0.59 per share set to be distributed to its shareholders on Dec. 31. Broadcom’s annualized dividend of $2.36 per share offers a modest 1% yield.
For those seeking reliable passive income paired with growth potential, Broadcom appears to be a compelling choice. The chip giant released its Q4 earnings report on Dec. 12, sparking an investor frenzy that sent shares surging more than 24% in the next trading session.
While total revenue of $14.1 billion came in lighter than expected, it still marked 51% year-over-year growth. Meanwhile, its adjusted EPS of $1.42 climbed almost 28% annually, surpassing Wall Street’s forecast figure of $1.39. Broadcom's Semiconductor Solutions Group, which includes its cutting-edge AI chips, experienced 12% annual revenue growth, reaching $8.2 billion.
The company is riding the wave of skyrocketing demand driven by the generative AI boom. In fact, the company pointed out that its AI revenue surged an astounding 220% year over year, hitting $12.2 billion in fiscal 2024. A significant portion of this growth comes from Ethernet networking components, which are crucial for connecting thousands of AI chips, positioning Broadcom as a key player in the infrastructure powering the future of AI.
At the close of Q4, the company held approximately $9.4 billion in cash and cash equivalents and generated $5.6 billion in cash from operations while investing $122 million in capital expenditures to support its continued growth. Looking ahead to fiscal 2025 Q1, management anticipates revenue to reach around $14.6 billion, while the adjusted EBITDA margin is expected to be approximately 66% of the forecast revenue.
Over the longer term, analysts tracking Broadcom project the company’s earnings to climb a notable 44.2% year over year to $5.35 per share in fiscal 2025 and grow another 17.7% to $6.30 per share in fiscal 2026. Bernstein analyst Stacy Rasgon has identified Broadcom as a company poised for its own “Nvidia moment,” driven by its rapidly growing role in AI.
Rasgon anticipates a sharp ramp-up in Broadcom’s AI chip revenue during the second half of 2025, with the company positioning itself to tap into a massive customer AI chip market opportunity projected to range between $60 billion and $90 billion by fiscal 2027. Broadcom’s semiconductor offerings span multiple high-demand categories, including networking, broadband, server storage, wireless, and industrial, with significant exposure to generative AI applications.
Given these promising factors, Bernstein has issued an “Outperform” rating on Broadcom and set a price target of $250, reflecting strong confidence in its future growth. Overall, Wall Street appears highly enthusiastic about AVGO stock, with a consensus “Strong Buy” rating. Of the 33 analysts offering recommendations, 30 advise a “Strong Buy,” and only three suggest “Hold.”
The average analyst price target of $242.24 indicates marginal potential upside from the current price levels, while the Street-high price target of $300 suggests that the stock could rally as much as 25.2%.
Chip Stock #2: Qualcomm
California-based Qualcomm (QCOM) stands at the forefront of innovation, delivering intelligent computing solutions. With its renowned Snapdragon platforms, Qualcomm powers extraordinary consumer experiences through cutting-edge AI, high-performance computing, and unparalleled connectivity.
With a market cap of almost $177 billion, Qualcomm shares are up roughly 7% over the past year.
Qualcomm has built a stellar reputation for rewarding its shareholders, boasting an impressive track record of 21 consecutive years of dividend increases. On Dec. 19, the company paid out a quarterly dividend of $0.85 per share, bringing its annualized dividend to $3.35 per share, yielding a highly enticing 2.2%. With a conservative payout ratio of 30.3%, Qualcomm not only demonstrates its commitment to returning value to investors, but also leaves room for future dividend growth.
Apart from its attractive dividend yield, Qualcomm's Q4 earnings release reveals that its Board of Directors has approved a $15 billion stock repurchase authorization. This new program, which has no expiration date, adds to the company’s existing repurchase initiative announced in October 2021, which still had $1 billion in repurchase authority remaining at the close of fiscal 2024.
The company dropped the results of the final quarter of fiscal 2024 on Nov. 6, which blew past both Wall Street’s top- and bottom-line projections. Qualcomm's revenue climbed almost 19% year-over-year to $10.2 billion, comfortably soaring beyond Wall Street's forecast figure of $9.9 billion, while its adjusted EPS of $2.69 demonstrated an impressive 33.2% year-over-year jump.
Diving deeper into Qualcomm's segment performance, its QCT division, which includes handsets, automotive, and other chips, experienced 18% growth in sales, reaching a total of $8.7 billion for the quarter. Meanwhile, Qualcomm’s technology licensing business, QTL, saw 21% year-over-year revenue boost, generating $1.5 billion.
For Q1 of fiscal 2025, management anticipates revenues to range between $10.5 billion and $11.3 billion, while adjusted EPS for the quarter is projected to land between $2.85 and $3.05. Analysts tracking Qualcomm project the company’s profit to climb almost 7.5% year over year to $9.09 per share in fiscal 2025 and rise another 14.6% to $10.42 per share in fiscal 2026.
As for Bernstein, analyst Stacy Rasgon believes Qualcomm shares are “exceedingly cheap.” Known for its expertise in mobile processors and 5G wireless chips, Qualcomm is well-positioned for continued growth. Encouraged by these prospects, Rasgon has given Qualcomm an "Outperform" rating and set a $215 price target for the stock.
QCOM stock has a consensus “Moderate Buy” rating overall. Out of the 32 analysts covering the stock, 16 recommend a “Strong Buy,” one suggests a “Moderate Buy,” 14 advocates “Hold,” and only one analyst gives a “Strong Sell” rating.
The average analyst price target of $204.69 indicates potential upside of 28.5% from the current price levels. The Street-high price target of $270 suggests that the stock could rally as much as 69%.
