Investors seeking artificial intelligence (AI) stocks have numerous options. However, Broadcom (AVGO) stands out due to its unique position in the AI market and three compelling reasons to consider buying its shares.
Broadcom’s ASICs are used in AI data center infrastructure by top tech companies like Alphabet and Meta Platforms. This niche has vast potential, with a total addressable market estimated to be $150 billion. The company’s third-quarter results showed management increasing its fiscal 2024 AI chip sales outlook to $12 billion, up from $11 billion.
As AI spending accelerates, Broadcom is well-positioned to benefit. Goldman Sachs estimates companies will spend $1 trillion on AI infrastructure over the next few years, while Nvidia believes it could be as high as $2 trillion. OpenAI has already begun working with Broadcom to design an in-house chip for AI.
Despite a 96% share price rise over the past year, Broadcom’s stock is relatively cheap compared to peers. Its forward P/E ratio of 27.6 is lower than Nvidia’s 34 and AMD’s 28.4. While not significantly undervalued, it presents a potentially attractive investment opportunity for long-term investors.
Overall, Broadcom’s unique AI niche, accelerating spending, and relatively low valuation make it an attractive buy now. With the company already tapping into high-end semiconductor demand and working with top tech companies, owning its shares looks like a solid long-term bet.
Source: https://www.fool.com/investing/2024/12/08/is-broadcom-stock-a-buy-now