Broadcom is a big name in the semiconductor industry. It is famous for its software and hardware components used in different electronic appliances from everyday items like laptops and mobile phones to industrial networking equipment and much more.
The company offers a wide variety of products, which is what makes it different from many of its competitors. It recently acquired VMware for $69 billion to further diversify its business. The deal gives it a big advantage over competitors by helping it improve its software offerings. It has also emerged as a strong player in the AI and cloud computing sector.
A technician working at a magnified microscope, developing a new integrated circuit.
Broadcom’s main products include digital subscriber lines (DSL), Passive Optical Networking (xPON), cable modems, and set-top box solutions. The revenue for the first quarter of 2024 was $12.5 billion, a 42.99% increase as compared to last year. It is expected that the revenue for 2024 will reach $39 billion, with a healthy cash flow of $14 billion.
Broadcom also deals in data centers, telecommunications, enterprise software, and daily life electronics. Cisco, Samsung, and Apple are some of the main customers of the company.
The chip maker is expected to have good medium-term prospects as it continues to show impressive financial performance, making it a strong pick in the semiconductor and software sectors.
It continues to capitalize on the trends of cloud services and advanced networking solutions as their demand continues to grow. As a result of a great cash flow, Broadcom invests in further innovation through its R&D initiatives, making it a strong growth player in the market.
Broadcom also continues to be a major player in providing AI infrastructure. Even though it can be argued that AI investments still have a huge question mark over them, what cannot be denied is that the technology will lead the next technological revolution, and Broadcom is well-placed to capitalize on that.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
Broadcom ranks 12th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 130 hedge fund portfolios held AVGO at the end of the second quarter which was 115 in the previous quarter. While we acknowledge the potential of AVGO as an AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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