Why AI Stock Broadcom Topped the Market on Tuesday

A new product rollout is always an attention-grabbing piece of news in the corporate world, and that goes double for businesses involved with artificial intelligence (AI).

On Tuesday, specialty chip maker Broadcom (NASDAQ: AVGO) announced it began shipping an advanced networking chip. Investors greeted this by pushing the company's stock up by more than 3% that trading session. That gain easily trounced the 0.6% increase of the S&P 500 index.

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Chipping away at the AI segment

Broadcom's Tomahawk 6 switch series is now on its way to the market, the company announced that morning (a switch, also known as a switching chip, is a highly specialized component that handles data trafficking through a computer network).

Image source: Getty Images.

According to Broadcom, the Tomahawk 6 boasts double the bandwidth of any switch available on the market just now. It's designed to handle the comparably much higher resource needs of artificial intelligence (AI) functionalities. The company said its new product has an unrivaled set of AI routing features and interconnect options.

The announcement came two days before Broadcom is slated to publish its fiscal second quarter of 2025 earnings. What also helped the stock rise was a pair of bullish new analyst notes released in anticipation of those results.

Two Broadcom bulls publish updates

Both Citigroup's Christopher Danley and JPMorgan Chase's Harlan Sur maintained their equivalent of buy recommendations in their respective updates. Danley went as far as to raise his price target on the stock significantly to $276 per share from his previous $210.

According to reports, Danley believes Broadcom will top analyst estimates for the quarter, especially considering that AI is an important driver of its sales, and demand for the technology remains scorching.

I'd be as bullish as those two gentlemen; Broadcom is very well placed to be a main supplier expanding AI capabilities, and its fundamentals should reflect that going forward.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.