The hyperscalers said it. Nvidia ‘s beat-and-raise confirmed it. Spending on powerful artificial intelligence chips and hardware is still off the charts and will be for some time. That signals, to us, a positive backdrop ahead of Broadcom ‘s earnings on Thursday evening. To be sure, it’s not all glowing. There has been a narrative developing that AI demand may be slowing, starting with Wall Street nitpicking Nvidia’s slight quarterly data center revenue miss, which has hit the Club stock since last week’s print, and book-ending with Friday’s disastrous guide from custom chip rival Marvell Technology . We, however, prefer to look at what the companies are saying and reporting. While Nvidia’s data center was a bit light versus the analyst consensus, the segment still grew 56% year over year. So, when Nvidia CEO Jensen Huang said on last week’s earnings call that this year was record-breaking and he expects the same next year, we were encouraged. Huang also said capital expenditures from the top four U.S. cloud service providers — those hyperscalers include Club names Amazon and Microsoft — are tracking in the hundreds of billions of dollars this year. The hyperscalers on their own calls earlier this summer signaled no end to the AI arms race because nobody wants to risk being left behind. That doesn’t sound like softening. Alphabet, whose Google Cloud is the third biggest, raised its full-year capex guidance in late July to $85 billion, up from $75 billion. CFO also said, “Looking out to 2026, we expect a further increase in capex, due to the demand we’re seeing from customers as well as growth opportunities across the company.” Broadcom’s longest-tenured custom chip client is Google, which also leans on Nvidia. Oracle ‘s cloud is a distant fourth. Like Nvidia, Broadcom designs semiconductors. Nvidia’s AI chips — known as graphics processing units, or GPUs — are the gold standard and the most sought-after by the biggest tech companies in the world. It’s increasingly selling those GPUs to customers as part of entire server racks that contain traditional computer processors, or CPUs, and networking gear linking them together. Broadcom’s AI bread and butter is working with some of those same clients to create custom chips, referred to as application-specific integrated circuits, or ASICs. Meta Platforms , also a portfolio company, is a big client of Nvidia chips and is believed to have started working with Broadcom on ASICs. Broadcom is also a significant player in the networking chips that stitch together many chips inside data centers so they communicate and transfer data smoothly. Back in June , when Broadcom reported its fiscal 2025 second-quarter results, both sides of its AI business were strong. On the call, CEO Hock Tan said he expects the company’s robust fiscal 2025 growth rate for AI revenue to “sustain into fiscal 2026.” Broadcom also forecasted 60% AI revenue growth for its fiscal third quarter, which is Thursday evening’s release. The current consensus of analyst estimates, compiled by LSEG, calls for an increase of 21% year over year in Broadcom’s total quarterly revenue to $15.83 billion and an earnings per share (EPS) advance of 33% to $1.65. AVGO 3M mountain Broadcom 3 months Broadcom had been on a five-session winning streak before dropping nearly 3.7% last Friday. The stock was unfortunately swept up in the negative investor sentiment around Marvell. Shares of Marvell tanked 18.5% last Friday after the company missed estimates on quarterly data center revenue and delivered weak guidance. On the earnings call, Marvell CEO Matthew Murphy said the company expects “non-linear growth in the custom [AI chip] business” and consequently flat data center revenue. Amazon is one of Marvell’s custom chip clients. “Broadcom should be the opposite of Marvell,” said Melius analysts in a note to clients Tuesday, pointing to revised higher spending for custom silicon semiconductors by key hyperscaler clients and inflecting networking demand Part of Melius’ conviction is that Broadcom’s networking division, which makes up 33% of the company’s revenues, should see “upside” on account of AI accelerators and networking chips being sold to hyperscalers for data centers. The analysts raised Broadcom’s target to $335 from $305, maintaining a buy rating on the stock. Jim Cramer agrees, saying Broadcom and longtime CEO Hock Tan are “going to deliver.” Melius analysts added that any weakness in Broadcom’s stock is a “buying opportunity since there is such a shortage of this type of leadership outside Nvidia in AI.” At least this close to an earnings print, the Club prefers to wait to see the actual numbers before making a move. “It’s for gunslingers. We don’t play the game of buying ahead of a quarter,” Jim stressed. We have a $290 price target and a hold-equivalent 2 rating on the stock – though those are subject to change once we get Broadcom’s Q3 results. Shares have gained 30% year to date, closing Wednesday just above $302.39. That strong 2025 is all the more impressive when considering the stock fought its way back from two major downturns — one in January after the DeepSeek shockwaves and in early April when tariff worries slammed the market. Morgan Stanley analysts on Tuesday called Broadcom its “preferred ASIC play,” and raised its estimates for calendar year 2026. Morgan Stanley raised its Broadcom price target to $357 per share from $338. The analysts also cited a successful VMware integration in their buy-equivalent overweight thesis. In fiscal Q2, Broadcom continued to make the most of its blockbuster VMware acquisition, working to move more customers to subscription-based accounts. Jeff Marks, director of portfolio analysis for the Club, talked about what we expect from Broadcom on Thursday. “We’re looking for them to continue to point to strength in its AI business (custom accelerators and networking), solid growth in software infrastructure, and a rebound in legacy semiconductor,” which includes enterprise networking and broadband. Basically, it’s all the non-AI chip businesses. In its fiscal second quarter, legacy semiconductor revenue fell 5%, with Tan predicting the segment was “close to the bottom” but “relatively slow to recover.” (Jim Cramer’s Charitable Trust is long AVGO, NVDA, AMZN, MSFT, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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