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Broadcom: Watered-Down AI Play

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  • Broadcom's AI business is growing rapidly but remains a small portion of its $1.2T valuation, making the stock richly priced for its current AI exposure.
  • AI revenues are forecast to reach $5.1B in FQ3, with custom AI accelerators and networking driving growth, but overall sales growth is less impressive.
  • Despite a $10B buyback and strong margins, future sales growth is projected below 20%, and AI's lower margins limit further profitability leverage.
  • The stock already trades at 14x FY27 sales targets, boosted by AI growing at a 60% clip, though Broadcom appears headed higher in the short term.
Broadcom Inc. (NASDAQ:AVGO) (NEOE:AVGO:CA) is a massive technology infrastructure company, shifting the focus into AI infrastructure. The company makes promising custom AI chips for industry leaders, but the market is already pricing in a lot of AI excitement. My investment thesis is Neutral on the stock, with the breakout prior to earnings likely dictating the stock price over the next period.


Read the full article on Seeking Alpha. 

Disclosure: No portion mentioned. Please review the disclaimer page for more details. 

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