By this point, it has become crystal clear that vast sums of money are pouring into AI as both companies and sovereign actors rush to harness the revolutionary technology. Much of this spending is going toward the hardware required to run AI workloads, and Broadcom (NASDAQ:AVGO) has been among the beneficiaries of this trend.
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The company reported record revenues of $19.3 billion last quarter, representing 29% year-over-year growth. Its sales guidance for the current quarter of $22 billion would represent a 47% increase from the prior year, and management has stated that its AI chip revenue (“chips, just chips”) will be in excess of $100 billion in 2027.
No surprise, AVGO’s share price has been soaring, gaining over 110% during the past twelve months as investors have jumped aboard this AI-powered train.
However, there were some hiccups earlier this year, as worries over AI capex and geopolitical turbulence sent tech stocks tumbling. Though AVGO wasn’t spared, it has since recovered and presently boasts gains of ~17% year-to-date.
Top investor Keithen Drury likes how AVGO is situated as the capex spend continues to flow, and predicts more gains are on the horizon thanks to rabid demand for AI infrastructure.
“Broadcom is partnering directly with AI hyperscalers to design custom chips that are tailored for the precise types of workloads they’ll be used for,” states the 5-star investor, who is among the top 4% of stock pros covered by TipRanks.
The approach is clearly working, notes Drury. He cites the company’s growing sales from its AI semiconductor division, which jumped by 106% to reach $8.4 billion in the last quarter. Hitting the expected $100 billion in annual sales by the end of 2027 would represent “a major acceleration,” he adds.
While Drury is also high on Nvidia’s prospects, he nevertheless points out that Broadcom is often able to offer a cheaper solution. And that also contributes to his confidence in AVGO going forward.
“Broadcom is challenging Nvidia’s dominance in the AI chip market, and its stock will likely be a major winner along the way,” sums up Drury. (To watch Drury’s track record, click here)
Wall Street is plenty bullish when it comes to AVGO as well. With 27 Buys and 4 Holds, AVGO enjoys a Strong Buy consensus rating. Its 12-month average price target of $465.55 points to an upside of ~15%. (See AVGO stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.