June 3 - Broadcom (NASDAQ:AVGO) shares climbed about 3% Monday after Morgan Stanley suggested the chipmaker may hit an inflection point in its custom silicon business, according to a Monday research note.

Analyst Joseph Moore said Broadcom's ASIC revenue this year will be led mainly by Alphabet (NASDAQ:GOOGL), a mature customer with moderate growth expectations. He noted Meta (NASDAQ:META) and ByteDance also ship in volume, but their 2025 contributions will likely be modest.

Moore, who maintains an Overweight rating on AVGO, pointed to Broadcom's AI and Ethernet businesses as key long-term drivers. He cautioned, however, that most AI-related sales this quarter will come from a fully penetrated customer, tempering near-term upside.

Moore added that AVGO feels more widely held than other AI names like Nvidia (NASDAQ:NVDA), which makes him slightly more constructive on NVDA. Still, he sees strong opportunities for Broadcom in networking and believes its valuation may not be capped as tightly as Nvidia's when numbers grow.

Broadcom is scheduled to report second-quarter results after the market close on June 5. Analysts expect EPS of $1.57 on revenue of $14.97 billion.

Is AVGO a Buy Now?

Based on the one year price targets offered by 36 analysts, the average target price for Broadcom Inc is $240.20 with a high estimate of $301.15 and a low estimate of $171.60. The average target implies a downside of -3.42% from the current price of $248.71.

Based on GuruFocus estimates, the estimated GF Value for Broadcom Inc in one year is $150.22, suggesting a downside of -39.60% from the current price of $248.71.

This article first appeared on GuruFocus.