Broadcom: The Next AI Stock to Keep Your Eye On
The rise of artificial intelligence (AI) stocks has been a hot topic since the release of OpenAI’s ChatGPT in late 2022. Companies like Nvidia have seen their stock prices soar, prompting moves like stock splits to increase liquidity for regular investors. But Nvidia isn’t the only player in the game. Broadcom (NASDAQ: AVGO) is another AI stock split that investors should consider adding to their portfolios.
Broadcom, formed by the merger of Broadcom Corporation and Avago Technologies in 2015, is a diversified semiconductor company that designs and manufactures a variety of information technology hardware. While Nvidia dominates the market for high-end GPUs used in AI training, Broadcom takes a different approach by developing custom chips tailored to clients’ specific needs.
For data centers, using Broadcom’s custom chips may come with higher initial costs and commitments compared to off-the-shelf solutions like Nvidia’s H100. However, the advantages in cost efficiency and power consumption make Broadcom an appealing option for long-term investments. Big-name clients such as Alphabet (utilizing Broadcom for its Google TPU chips) and Bytedance rely on Broadcom for powerful processors, especially with export controls limiting access to Nvidia’s GPUs.
In addition to its AI-related growth potential, Broadcom’s business is diversified across multiple industries, ranging from smartphones to enterprise networking. The company’s acquisition of VMware in 2023, a deal worth $69 billion, expanded its exposure to the infrastructure software business and contributed to a 43% year-over-year increase in revenue in the second quarter.
Despite Broadcom’s stock price jumping nearly 470% over the last five years, the announcement of a 10-for-1 stock split has caught the attention of smaller investors. The split, scheduled for July 15, aims to bring the quadruple-digit stock price back down to more accessible levels. With a forward price-to-earnings (P/E) ratio of 28, Broadcom’s valuation remains attractive compared to AI-focused alternatives like Nvidia and Advanced Micro Devices, making it a safer bet for long-term AI opportunities.
Should you invest $1,000 in Broadcom right now? The Motley Fool Stock Advisor team has identified what they believe are the 10 best stocks for investors to buy. While Broadcom may not be on that list, their recommendations have yielded significant returns over the years, surpassing the performance of the S&P 500. With the AI industry on the rise, Broadcom presents a compelling investment opportunity for those looking to capitalize on the growing demand for semiconductor solutions.
Invest wisely and consider the long-term growth potential of companies like Broadcom in the evolving AI landscape. Stay informed with the latest insights and recommendations from Extreme Investor Network to make the most of your investment strategy. Join our network and unlock exclusive content tailored to savvy investors seeking financial success.