Semiconductor designer Broadcom Inc. (NASDAQ:AVGO)’s CEO, Hock Tan, is one of Cramer’s favorite executives in the space. The CNBC TV host regularly praises the CEO as being one of the ‘toughest’ executives in his industry. Broadcom Inc.’s shares closed 2.7% lower on September 3rd, the day after the firm reported its second quarter earnings. The dip came even as the firm demonstrated strong growth suitable for a company with tailwinds from custom AI chip design. Cramer discussed the results in his morning appearance on the 3rd:
“I thought that this, I know that the next quarter is not going to be good. But I do think that the ‘AI revenue double again in fiscal year 2028 to 230 billion was the jaw drop statement. Remember he did up next year to 15 billion. . .
“It felt like bravado, because this quarter was not beaten and it seemed hollow until he dropped that number, Jeff Marks with a great note, the 230 billion. But then by the time I got up, people just forgot it and it’s back to 353 and it’s trying to get a stake in the ground, 353, 355, but it was at 366 last night, right before Reachers.”
On the growth front, Broadcom Inc. posted 86% in annual revenue growth and its AI-related semiconductor revenue surged by 221% annually to $16.7 billion. Additionally, management also raised fiscal 2026 guidance to $58 billion and 2027 and 2028 guidance to $115 billion and $230 billion. The growth is key to the firm’s debate as it centers on whether it will be able to capture the expected high infrastructure spending. Broadcom Inc. enjoys a key place in the market since it is able to design custom AI chips which are used by big technology firms.
At the same time, the earnings also indicated tighter margins. Just as NVIDIA guided lower margins for its current quarter, Broadcom Inc. outlined that the gross margin should dip to 73% in Q4. The guide marks a major drop over the previous fourth quarter’s 78% gross margin. Additionally, just as with NVIDIA, the firm also depends almost entirely on AI-related revenue. During the third quarter, Broadcom Inc.’s non-AI semiconductor revenue grew by a paltry 5% to $4.2 billion.
Looking at hedge fund sentiments, 170 out of the 1,006 funds covered by Insider Monkey had held a stake in Broadcom Inc. in Q2. This figure marked a slight drop over Q1’s 173 out of 1,022 funds. However, others, such as Woodline Partners which bumped its stake by 30% to $444 million, increased their stakes. On the valuation front, the stock trades at a forward P/E ratio of 19, which is lower than NVIDIA’s 25.58. Short interest as a percentage of float is negligible at 1.20%.
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