Buy this AI chip stock for 2025, Jefferies told its clients

Investing.com -- Jefferies named Broadcom Inc (NASDAQ: AVGO) as its top pick for 2025, given company’s strong position in the rapidly growing AI chip market, driven by demand for custom-designed chips, or ASICs.

Jefferies raised its price target on the stock to $300 from $225, banking on strong earnings growth.

Broadcom's advanced chips are expected to rival Nvidia (NASDAQ: NVDA) Corp’s in compute density as new technologies like 3.5D packaging and silicon photonics gain traction.

The brokerage noted the Broadcom’s role in building powerful AI clusters, with major customers aiming to deploy 1 million computing units. These clusters support artificial general intelligence, a key area of innovation.

Jefferies estimated Broadcom’s AI chip sales could generate over $60 billion in revenue by 2027, driving earnings per share to $12 or more. It sees significant upside potential if Broadcom captures even a fraction of the high-end market.

Broadcom's AI business has gained momentum, particularly in training-focused chips, which command higher prices as designs become more complex. The firm’s chips are expected to grow larger and incorporate more advanced technologies, boosting average selling prices.

Jefferies also noted a strong outlook for Broadcom’s networking and optical products.

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