Broadcom (AVGO -4.38%) stock has seen impressive gains of 96% over the past year, and the semiconductor giant is expected to continue its strong momentum after beating consensus estimates for revenue and earnings in the second quarter of fiscal year 2024. Additionally, the company announced a 10-for-1 stock split, set to take effect on July 15, to make ownership more accessible to investors and employees.
The stock split is a cosmetic measure that does not affect the company’s fundamentals or market capitalization but has been well received by investors, with shares rising 12% following the announcement. Broadcom’s quarterly revenue increased 43% to $12.5 billion, driven by a 280% surge in revenue from AI chip sales. The company has raised its full-year guidance to $51 billion in revenue, up from $50 billion, due to growing demand for its AI chips.
Broadcom’s AI business is thriving, with increased demand for enterprise Ethernet network switches and custom AI chips in data centers. CEO Hock Tan mentioned on the earnings call that the company has received next-generation custom AI accelerators for hyperscale customers, positioning Broadcom for further growth in AI revenue.
The Ethernet switch market is projected to grow by 20% by 2023, thanks to AI, and the global AI data center switches market is expected to generate $20 billion in annual revenue by 2029. With AI driving business growth, Broadcom has a strong long-term growth opportunity in the semiconductor industry.
While the stock split may make Broadcom shares more accessible to smaller investors, it is important to consider the company’s current valuation before investing. With a P/E ratio of 64, Broadcom is trading at a premium compared to the Nasdaq-100 index but has a forward P/E of 31, indicating potential upside for investors in the future.
Overall, Broadcom remains an attractive AI stock to buy following its strong quarterly results and stock split announcement. The company’s growing AI business and positive outlook make it a promising investment opportunity for investors looking to capitalize on the semiconductor giant’s continued success in the market.
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https://www.fool.com/investing/2024/06/16/broadcom-announces-a-10-for-1-stock-split-time-to/