Broadcom Inc. AVGO is a semiconductor and infrastructure software solutions company riding huge growth from the artificial intelligence (AI) boom. AVGO works directly with multiple AI hyperscalers and posted 77% AI sales growth in its recently reported Q1 FY25.
Broadcom stock has more than quadrupled the tech sector over the past decade (+1,300%), including a 200% run in the last two years. Broadcom briefly surpassed the $1 trillion market cap threshold, joining Nvidia, Apple, and other tech titans.
The stock has cooled off after skyrocketing too far, too fast following its blockbuster earnings release in early December.
Now looks like a great time to buy Broadcom, down nearly 25% from its peaks, as it finds support near key technical levels. AVGO offers massive AI upside and long-term exposure to growth across industrials, smartphones, and other areas.
Why This Soaring Tech Stock is a Long-Term Winner Alongside Nvidia and All of AI
Broadcom’s semiconductor solutions are critical components in telecommunication equipment, smartphones, data center servers, enterprise networking, and beyond. AVGO also provides enterprise software, including cybersecurity and hybrid cloud infrastructure, serving a wide-ranging customer base.
AVGO acquired VMware in November 2023 to boost its software portfolio and data center and cloud infrastructure offerings.
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Broadcom is a leader in networking processors that manage connections between data-center components, including Nvidia’s AI-focused chip clusters.
On top of that, Broadcom works directly with tech giants like Meta META to design their application-specific integrated circuits (ASICs). Custom AI chips are gaining steam since they can perform AI workloads similar to Nvidia’s industry-leading offerings.
Broadcom collaborates with three AI hyperscalers (tech companies operating massive AI data centers, like Meta, Alphabet, and Amazon). AVGO said on its Q1 earnings call on March 6 that it expects these “three hyperscale customers will generate a Serviceable Addressable Market, or SAM, in the range of $60 billion to $90 billion in fiscal 2027.”
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Plus, “two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models.” In total, AVGO is working with four more AI hyperscalers beyond its three established AI giant clients.
Broadcom’s Impressive Growth Outlook
Broadcom grew its AI sales by 77% in Q1 FY25 (reported on March 6), boosting total revenue by 25% and lifting EPS by 45%.
AVGO’s AI growth offset slowing sales in its non-AI semiconductor segments, such as industrials, wireless, and enterprise networking, which are facing cyclical downturns.
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AVGO’s beat-and-raise first quarter of 2025 lifted its earnings outlook once again, earning it a Zacks Rank #2 (Buy) and extending its wave of upward revisions. Broadcom is expected to expand adjusted EPS by 35% this year and 18% in 2026, after 15% growth last year.
CEO Hock Tan said in prepared remarks that AVGO sees continued strength in AI semiconductor revenue in Q2 as “hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers.”
Broadcom is projected to grow its revenue by 20% in FY25 and 15% in FY26, following 44% expansion in 2024.
Time to Buy This Beaten-Down AI Stock on the Dip?
Broadcom shares have soared over 9,000% in the past 15 years, blowing away tech’s 500% and crushing five of the Magnificent Seven stocks—lagging only Nvidia NVDA and Tesla. AVGO stock more than quadrupled the tech sector over the past decade (+1,300%), including a 200% run in the last two years.
AVGO’s two-year charge helped it outpace all of the Mag 7 except Nvidia. The AI chip stock outclimbed the entire group over the last year, briefly hitting a $1 trillion market cap in December.
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Investors can buy Broadcom down nearly 25% from its early December peaks. The stock was due for a selloff after skyrocketing following its Q4 release in December. AVGO’s quick fall came alongside the broader AI trade and most of the stock market, washing away nearly all its post-Q4 gains.
The stock has tumbled from some of its most overheated RSI levels (a widely tracked momentum indicator) in recent years to some of its lowest. On a longer timeframe, Broadcom is at some of its lowest RSI levels in the past decade.
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AVGO is finding support above its 50-week, right at its 200-day moving average, and near the top end of its pre-December breakout range.
Broadcom still trades at a premium to the tech sector in terms of forward earnings, which makes sense given its performance and growth outlook. Yet, it’s nearly even with tech on the Price/Earnings-to-Growth (PEG) ratio front.
On top of that, Broadcom pays a dividend, and 30 of the 34 brokerage recommendations tracked by Zacks are “Strong Buys.”
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This article originally published on Zacks Investment Research (zacks.com).
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