For Broadcom Inc. (NASDAQ:AVGO), just like with NVIDIA, the debate is all about sustained demand for AI compute. And just as with NVIDIA, Cramer’s a big fan of the firm. The CNBC TV host regularly praises Broadcom Inc.’s CEO for being one of the top executives in the industry. Naturally, with the debate having shifted recently to the demand for compute after major AI executives called for a slowdown, Cramer couldn’t believe the market didn’t optimistically evaluate CEO Hock Tan’s claims:
“Hock Tan, said there will be no slowdown and the orders are great. And people are like, woah, who’s that guy? 1.6 trillion dollar company, does it mean anything? The stock’s back to where it was when they reported!”
For Hock Tan, the orders that his firm Broadcom Inc. is expecting due to AI are immense. During the firm’s fiscal third quarter earnings, Tan outlined that his firm had secured the supply to double AI revenue to $115 billion in 2027. Crucially, the Broadcom Inc. CEO also outlined that in 2028, the AI revenue could again double to sit at $230 billion. It’s this guidance that Cramer is talking about, and his remarks are quite relevant when we consider the order breakdown.
After all, Anthropic is believed to be Broadcom’s biggest customer in 2027 through deploying 5 gigawatts of TPUs in 2027 and 10 gigawatts in 2028. Alongside, OpenAI is expected to deploy more than 5 gigawatts of XPU chips in 2028. The supply that Tan referred to and Cramer discussed covered the raw materials needed to manufacture these chips. The Broadcom CEO explained this in the call:
“And by the way, the same thinking applies to 2028 when we give you that outlook of $230 billion. This is real demand, we believe, based on what’s available, what data center sites, locations are ready 2028 with respect to our customers, the size of what we have, and against the supply chain we have in leading edge wafers, substrates, and HBM memory. This is again, a carefully structured outlook that we believe we can achieve.”
Therefore, for Broadcom, the narrative depends on the viability of the orders and whether the valuation accurately reflects the future that the firm might encounter. Overall, the third quarter saw the firm maintain its growth trajectory and deliver 86% annual revenue growth and 221% AI revenue growth. Yet, the shares closed lower on the 3rd after the firm reported its earnings on the 2nd. As part of the release, Broadcom also outlined that it expected to earn $34.8 billion in its fiscal fourth quarter, which missed analyst estimates of $35.03 billion.
Looking at hedge fund sentiment, in Q2, Insider Monkey’s data shows that 170 funds had disclosed a stake in Broadcom, which was lower than the 173 in Q1. Two Sigma Advisors and Third Point exited their stake. On the valuation front, the shares trade at a forward P/E ratio of 19.30, which is lower than NVIDIA’s 25. Short interest as a percentage of float is negligible at 1%. As for Cramer, even though he appeared optimistic about the stock, it didn’t make it into our list of the 10 Blue Chip Stocks Jim Cramer is Crazy About.
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