Broadcom stock is an attractive buying opportunity, even after its rally this year, according to HSBC.

On Tuesday, analyst Frank Lee raised his rating for the company's stock to Buy from Hold and increased his price target to $400 from $240.

Broadcom's semiconductors compete in several categories, including networking, broadband, server storage, wireless, and industrial. The company is a leader in the market for high-end AI application-specific integrated circuits, or AI ASICs. It helps large technology companies design custom chips for AI.

"We turn positive on Broadcom as we now believe its ASIC revenues will significantly beat market expectations from better ASIC project visibility as well as ASP [average selling price] pricing power," Lee wrote.

Shares were up 3.9% to a new high on Tuesday. The stock has gained 13.8% this year.

Lee said the market is underestimating Broadcom's potential to grow its AI chip revenue over the next two years. He also expects the company will be able to add significant new customers in the coming years.

"We believe that hyperscaler capex [capital expenditures] will drive ASIC growth as almost all big hyperscalers look to invest in their custom silicon program," he wrote.

Earlier this month on the earnings conference call, CEO Hock Tan said AI chip demand may accelerate during the second half of 2026 due to strong inference demand. Inference is the process of generating answers from AI models.