Broadcom (NASDAQ:AVGO) stock has been one of the hottest semiconductor picks over the past two years, more than tripling to an astounding 220% gain. Though the momentum has slowed since summer, there are still plenty of reasons to give the $773.8 billion AI chip giant a look as it looks to make a run for the $1 trillion market cap mark in 2025.
With AVGO stock splitting 10-for-1 back in July, shares go for $165 and change per share. Clearly, a split isn’t necessary anytime soon. Even if the past year of momentum were to continue, I view AVGO stock as one of the least likely of AI stocks to split. Indeed, for a stock that used to go for more than $1,000, it could take a decade or more before we start talking about another Broadcom split. Of course, I could be wrong if a surge that rivals the likes of an Nvidia (NASDAQ:NVDA) is in the cards over the next four years or so.
In any case, just because Broadcom is far less likely to split than most of its peers doesn’t mean it’s not a great bet right here. Undoubtedly, if a big AI correction ends up striking at some point over the next year (I guess you could say we’re overdue for another tech-led market sell-off), perhaps value investors will be able to get much lower prices without having to wait for the next stock split.
Who knows? Perhaps investors will have another shot to pick up the name at less than $100 per share if a market-wide pullback occurs. Pending such a market-wide crash, though, I view Broadcom as still having one of the best value propositions in the AI chip scene. Nearly a month ago, Broadcom announced its partnership with ChatGPT-maker OpenAI to make their own chips. Undoubtedly, it seems like many tech firms are taking chip design into their own hands.
Key Points About This Article
- Broadcom stock isn’t close to splitting. It may very well be one of the last to split over the next five years to a decade.
- The growth opportunity in custom chips and modest multiple make AVGO stock tempting.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Broadcom and OpenAI are working on AI chips. Such a partnership could be huge.
The OpenAI-Broadcom duo seems like it could be a force to be reckoned with as they bring a ton to the table. Undoubtedly, OpenAI has the AI software expertise that’s virtually next to none, while Broadcom has the AI chip design talent to beat.
While the group effort, which will also see Taiwan Semiconductor (NYSE:TSM) help out as a manufacturer, will take some time, I certainly would not bet against the potential offering as the dependence on Nvidia hardware looks to lessen over time.
Though the somewhat recent OpenAI team-up is the most intriguing, let’s not forget about the other Broadcom partnerships that could pay dividends as firms funnel more cash toward designing custom hardware that powers their AI applications. Notably, Broadcom’s Alphabet (NASDAQ:GOOG) Google, and Meta Platforms (NASDAQ:META) partnerships could be key growth drivers.
Arguably, the partnership opportunities in custom AI chips make Broadcom the most exciting AI company that isn’t named Nvidia. There are perks (financial and practical) of taking ownership of both the hardware and software, something big tech has realized in the early days of the AI boom.
Apart from custom chips, Broadcom’s networking and software businesses could also stand tall for the firm, even if the AI trade were to take a bit of a break in the near future. And for value-focused investors, I’d argue Broadcom stock remains more attractive than the shares of the Magnificent Seven companies (Nvidia included) at 26.74 times forward price-to-earnings (P/E).
The bottom line
Broadcom shares may be overheated, but unless we’re in for a widespread bear market or an unforeseen tumble in AI stock multiples, I think Broadcom will be at full speed ahead. In any case, I wouldn’t wait for a stock split (it will not happen anytime soon) or a drastic pullback before considering getting into the name. Perhaps watching and nibbling is a smart idea for cautious investors who know the stakes at this phase in the AI upswing.
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