Cramer says Broadcom is the real play in Meta’s chip partnership

Jim Cramer made a pointed call this week: in the context of Meta Platforms (NASDAQ:META | META Price Prediction) partnering with Broadcom (NASDAQ:AVGO) to produce tens of millions of custom AI chips, Cramer said “But Broadcom is the one that I think you need to focus on.” I agree, and here’s why:

Why Broadcom, and Why Now

After a 4.2% rally, Broadcom’s market cap surpassed Meta’s. Broadcom currently sits at a market cap near $1.88 trillion, trading at $396.72, up 13% over the past week and 123% over the past year.

The logic is straightforward: Meta is spending aggressively to build AI infrastructure, with 2026 capex guidance of $115 to $135 billion. That spending flows directly through suppliers like Broadcom. Meta carries the execution risk and balance sheet weight. Broadcom collects the revenue.

Broadcom’s most recent quarter showed AI chip revenue of $8.4 billion, up 106% year over year, above the company’s forecast. CEO Hock Tan said: “Our AI revenue growth is accelerating, and we expect AI semiconductor revenue to be $10.7 billion in Q2.” The company has a stated goal of exceeding $100 billion in AI sales by 2027.

The Valuation Picture

Broadcom trades at a forward PE of 34x, elevated but anchored by a PEG ratio of 0.8. Analyst consensus is heavily bullish, with 40 buy ratings and zero sells, and a consensus price target of $473.

Meta trades at a forward PE of 22x with a consensus target of $856. I’ve owned Meta since December 2022, and the business is strong. But Meta is absorbing enormous costs right now. Total costs rose 40% year over year in Q4, and long-term debt climbed to $58.7 billion from $28.8 billion. That is the price of building the infrastructure that makes Broadcom’s order book grow.

Cramer’s call is essentially a toll road argument: Meta is building the highway, but Broadcom collects the toll. If you believe hyperscalers will keep spending aggressively on custom silicon through 2027, look seriously at Broadcom. If you think Meta’s AI buildout could stall, the chip supplier still has Google, Anthropic, and others filling that pipeline. Reddit’s wallstreetbets community drove sentiment scores as high as 82 after Broadcom announced a long-term chip and networking supply agreement with Google through 2031, which tells you the market sees this as a multi-customer story, not a single-partner bet.

Broadcom’s record adjusted EBITDA margin of 68% and free cash flow of $8 billion in a single quarter show a business that converts AI demand into real cash at a rate few companies can match. That is the core of Cramer’s argument, and the numbers support it.