Broadcom Inc. (NASDAQ:AVGO) is a key beneficiary of the AI-driven rally in the semiconductor sector, alongside Nvidia (NVDA). The company’s stock performance this year has been supported by its vital role in AI-related infrastructure and applications. Despite facing industry-wide and internal risks, such as integration costs from the VMware acquisition, cyclical downturns, and competition, Broadcom continues to show revenue and earnings growth. The VMware integration, while initially dilutive to profit margins, has expanded Broadcom’s reach into cloud opportunities, leading to increased revenue contributions and synergies. The company’s transition to a subscription licensing model for VMware products presents risks due to cyclical and secular factors but also offers potential long-term benefits in revenue visibility. As AI interest grows, Broadcom’s custom ASIC AI accelerator business has positioned it as a market leader, providing a competitive advantage amidst rising demand for data center GPUs. The company also benefits from networking solutions needed to support AI clusters, further enhancing its growth trajectory. Looking ahead, Broadcom’s forecasted revenue growth in FY 2024 is expected to be driven by AI-related and VMware revenue contributions, along with cost synergies and operating leverage improvements. The stock split scheduled for July 12 may lead to increased volatility but could potentially boost the stock’s performance post-split, given its strong fundamentals. While trading at a premium compared to peers, Broadcom’s prospects for continued growth and earnings expansion support its valuation at current levels. Overall, the company is well-positioned for growth in the near term, with potential for upside appreciation following the stock split.
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https://seekingalpha.com/article/4701186-will-broadcom-reach-new-heights-leading-up-to-its-10-for-1-stock-split
