Nvidia Corp. (NASDAQ: NVDA), has led the AI gains in 2024. Others are also benefiting from the continued focus on artificial intelligent. Broadcom Inc. (NASDAQ: AVGO), for example, has risen by an impressive 800% since COVID’s pandemic began.
AVGO shares have grown from $1,000 to $9,000 (excluding dividends) between March 2024 and September 2024. But is the rally over? Did you miss it? Let’s explore.
Broadcom has a different AI strategy than Nvidia
Broadcom is one of the biggest beneficiaries of artificial intelligence, but it’s not playing the frenzy in the same way as Nvidia.
Broadcom is not competing with Nvidia for mass-market GPUs. Instead, it is making its mark in customized AI chips. It designs application-specific circuits (ASICs), which are tailored to specific AI tasks, to meet the needs of its customers.
Broadcom counts Google and other big names as customers. There are rumors that Meta Platforms is also using its ASICs to run AI workloads. OpenAI, the ChatGPT maker, is also reportedly in discussions with AVGO about joining its list of top customers.
Custom AI chips is a rapidly growing industry. Broadcom, which started the year with an AI revenue of $7.5 billion, now expects up to $12 billion by 2024 as “customers scale up and out their AI clusters”.
JPMorgan estimates that the total addressable market of AVGO’s AI custom chips will reach $150 billion in the next five year. This is a good enough reason to invest in Broadcom today and anticipate future gains.
AVGO is cheaper than NVDA
Broadcom is still worth buying despite its massive year-to date rally. Its stock has also recently been split 10-for-1.
According to a recent study, stocks tend outperform benchmarks and by a large margin within the first 12 months following the split. Why? Stock splits increase liquidity by making shares of a company more accessible to retail investors.
Plus, AVGO is still a cheap stock to own compared with the likes Nvidia and Advanced Micro Devices Inc. (NASDAQ: AMD). Broadcom has a price-to-earnings ratio of 28 compared to AMD’s 30 and Nvidia’s 43.
Some believe AVGO will soon be a $1 trillion company.
Broadcom stock could rise to $210
Broadcom is more diversified than its AI competitors, as it also manufactures network components that are widely utilized in data centers.
Matthew Ramsay, TD Cowen analyst, says that a $69 billion purchase of VMWare will add software services to AVGO’s list of offerings.
The investment firm reiterated last week its “buy” ratings on the multinational chipmaker and said that its shares could rise further to $210, signaling a potential 22% increase from here.
Ramsay cited AVGO’s third-quarter earnings report for his bullish outlook on the semiconductor stock. Broadcom is playing in the AI frenzy by being a hardware and software company. This explains why the share price of Broadcom will likely continue to rise.
This post Broadcom stocks has grown from $1,000 to $9,000 in four years: What’s next? This post may be updated as new information becomes available
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