Broadcom has joined the exclusive club of technology companies worth over $1 trillion in market value, after its stock surged 24% last Friday following the release of its financial results for fiscal 2024.
The company’s artificial intelligence (AI) revenue, which includes custom chips and networking equipment for data centers, increased by a whopping 220% to $12.2 billion in fiscal 2024. This significant growth is expected to continue, with Broadcom forecasting AI revenue of between $60 billion and $90 billion annually by fiscal 2027.
However, investors should be cautious due to the company’s lofty valuation. Broadcom’s stock trades at a price-to-earnings (P/E) ratio of 183, making it an expensive investment compared to the Nasdaq-100 technology index. The company’s price-to-sales (P/S) ratio is also high at 20.7.
While short-term investors may want to wait for a pullback in the stock price, long-term investors who are willing to hold onto their shares for three years or more may see an opportunity to play the AI boom with a high-quality stock like Broadcom. The company’s strong growth prospects and potential for substantial returns make it a compelling investment option for those willing to take on the risks.
Source: https://www.fool.com/investing/2024/12/16/meet-wall-street-1-trillion-ai-stock-dont-rush-buy