Semiconductor and infrastructure software company Broadcom’s (NASDAQ:AVGO) stock skyrocketed 79% YTD on the back of the AI wave. Investor sentiment remains buoyant, fueled by the long-term potential AI offers chip stocks. While chip demand for personal computing and smartphones has been lukewarm this year, most analysts believe Q4 will be favorable. Broadcom’s strategic investments and commitment to AI make me bullish on AVGO’s stock.
Outstanding Growth Trajectory
Broadcom has emerged as a key player in the field of AI innovation. Its strengths are its semiconductor design, networking technologies, and software solutions. Using this expertise, the company is now integrating AI capabilities into its diverse array of products and services.
Broadcom’s revenue has increased from $13.2 billion in Fiscal 2016 to $35.4 billion over the trailing 12 months, reflecting the magnitude of its growth. Over the same period, earnings per share (EPS) have increased from $11.45 to $32.50.
This significant growth trajectory most likely justifies Broadcom’s stock price surge of 389% over the last five years, compared to the tech-heavy Nasdaq Index’s (NDX) 139% gain over the same period.
Over the last few years, the acquisition of enterprise software companies like Symantec’s Enterprise Security Business and CA Technologies has allowed Broadcom to augment its AI capabilities significantly while diversifying beyond chip-making. Infrastructure Software revenue accounted for 22% of total revenue in Fiscal 2022. With these acquisitions, the company expects to drive revenue by powering its software operations.
More recently, macro headwinds affected personal computing and smartphone market demand this year. Nonetheless, Broadcom reported a robust third quarter Fiscal 2023. Total revenue grew 5% year-over-year to $8.9 billion, while adjusted EPS jumped to $10.54 from $9.73 in Q3 Fiscal 2022.
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Notably, in Q3, the Semiconductor Solutions segment accounted for 78% of total revenue, with Infrastructure Software making up for the rest. In Q3,…
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