In the second half of 2024, concerns about overbought AI stocks are growing, with warnings from Wall Street analysts about market concentration and potential corrections. One stock drawing attention is Broadcom Inc (NASDAQ:AVGO), ranked eighth on the list of overbought AI stocks. With a PE ratio above 70 and an RSI above 60, Broadcom is considered one of the most overbought stocks in the market.
Broadcom is the fourth largest holding of the Invesco QQQ Trust Series 1 ETF, with 115 hedge fund investors holding the stock. Some analysts believe that Broadcom can dominate the high-end segment of the custom chip market, with a potential market worth between $20 billion and $30 billion. However, concerns about Broadcom’s valuation have been raised, given its P/E multiple of 52 and high debt levels.
In the first quarter of 2024, Broadcom posted revenue growth of 34%, which surprised Wall Street, but its adjusted earnings growth was lower, indicating tight margins. The company’s EV/EBITDA ratio is 22.5, higher than its historical average and industry median. Analysts expect Broadcom’s revenue growth to be 13% next year, lagging behind industry leaders.
Carillon Eagle Growth & Income Fund highlighted Broadcom as a beneficiary of AI, with AI-related silicon sales representing a significant portion of the company’s revenue. Despite the potential of Broadcom, some believe that other AI stocks offer greater promise for higher returns in the near term.
While the stock has an average price estimate of $1,533, representing a 9% upside potential according to Wall Street analysts, it is important to note that Broadcom’s valuation is a topic of concern due to the current market conditions. As such, investors may want to explore other AI stocks with lower valuations and potential for growth in the AI sector.
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https://finance.yahoo.com/news/broadcom-inc-nasdaq-avgo-overbought-133922835.html
