Here's Why We're Switching Sides On Broadcom (Rating Downgrade)
Summary
- Much of Broadcom Inc.'s rally this year has been buoyed by market confidence in its competitive advantage in custom ASICs and networking solutions, which are critical in AI infrastructure.
- But the stock's post-earnings pullback reflects concerns pertaining to the uncertain recovery timeline for Broadcom's non-AI segments, which still account for the bulk of its business.
- The infrastructure software segment also faces impending risks of maturation, which limits margin expansion and cash flow improvement needed to address the elevated debt exposure acquired from VMware.
- This leaves little durability to the stock's current valuation.
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Broadcom Inc.’s (NASDAQ:AVGO) selloff in response to its lighter-than-expected F4Q revenue guidance has largely overshadowed the company’s beneficiary position amid burgeoning AI momentum. This is consistent with a broader trend observed in the latest earnings season, whereby
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