Broadcom, a diversified chipmaker, is well-positioned to benefit from the current AI boom. While not receiving as much attention as other AI stocks, the company is expected to see an increase in demand for chips, especially in the AI-powered generative infrastructure sector.
With specialties in custom chips and network chips, Broadcom recently acquired VMware, further expanding its portfolio. This move is likely to positively impact the company’s revenue as demand for AI-related technologies continues to grow. Analysts at Melius Research have initiated coverage of Broadcom with a Buy rating and a $1,850 price target, citing the company as a “must-have AI stock” due to its leadership in various chip categories.
Despite already experiencing significant growth in its shares, up more than 150% since the beginning of the year, Broadcom’s business has yet to fully reflect this success in its financial results. In its fiscal first quarter, the company reported 11% organic revenue growth, fueled by AI-related tailwinds and despite some headwinds from the semiconductor sector.
Looking ahead, Broadcom expects a substantial increase in adjusted EBITDA to $30 billion this year, primarily driven by the impact of the VMware acquisition. With a current P/E ratio of just over 30, there is potential for further growth if the company can effectively capitalize on the AI boom and demonstrate accelerated revenue growth.
In conclusion, Broadcom’s strong position in the chip market, coupled with its recent acquisition of VMware, makes it a promising player in the AI space. As demand for AI technologies continues to rise, Broadcom is well-equipped to leverage its expertise in custom and network chips to capitalize on this trend and drive further growth in the future.
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https://www.fool.com/investing/2024/06/07/is-broadcom-stock-going-1850-1-wall-street-analyst/