During the September 14 episode of Mad Money, Jim Cramer addressed the broader tech sector pullback and mentioned Broadcom Inc. (NASDAQ:AVGO) as an attractive option for investors looking past short-term volatility. He stated:
Well, it’s a tough time to come out to San Francisco, a day when the whole AI complex is getting hammered because Anthropic and OpenAI seem to be, I don’t know… pulling in their horns. Actually, I think there’s some real bargains in this group. Take Broadcom, the maker of chips, networking equipment, and tech infrastructure and software with a stock that’s down more than 10% over the past month. At the beginning of this month, Broadcom reported a strong set of results, issued a spectacular multi-year forecast, but their guidance for the current quarter was, I don’t know, viewed by some as in line.
The stock got slammed. I think Broadcom’s still on track to put up some incredible growth because they’re at the heart of the AI ecosystem because the company’s never let us down in all the years my Charitable Trust has owned it. And down here, roughly 150 points below its June high, the stock may be too cheap to ignore.
Evaluating the Financial Engine Behind the Custom Chip Leader
Recent financial reports from Broadcom Inc. highlights the scale of expansion driving its core semiconductor and infrastructure divisions. Total revenue for the fiscal third quarter reached $29.6 billion, representing an 85.5% increase compared to the same period in the previous year. Artificial intelligence semiconductor revenue surged 221% to $16.7 billion, accounting for roughly 56% of total revenue. Remaining performance obligations climbed significantly to $179.2 billion, providing substantial visibility into future contracted revenue. Broadcom also serves major hyperscale AI customers including Alphabet and Meta Platforms.
Management raised its full year guidance to $58 billion from $56 billion in artificial intelligence revenue, while projecting $115 billion for fiscal 2027 and $230 billion for fiscal 2028. The figures highlight a deep integration into the enterprise artificial intelligence ecosystem through custom accelerators and high-speed networking solutions.
Weighing Valuation Realities and Market Expectations
Even with record-breaking results, the market reacted sharply when near-term guidance failed to match the explosive beats of previous quarters. Broadcom Inc.’s stock has dropped roughly 7% at the time of writing since the day the company reported its earnings on September 2. That pullback pushed the forward earnings multiple down to a much more reasonable 18.1x. The broader economic pressures and shifting capital spending plans across major tech giants mean investors still have to weigh the inherent cyclicality of the chip sector.
Institutional Footprint and Market Sentiment Indicators
Institutional interest in Broadcom Inc. remains substantial, with major asset managers maintaining large allocations. According to the Insider Monkey database, 170 hedge funds had a stake in the company compared to 173 in the prior quarter. With 15.1 million shares, Fisher Asset Management was the most prominent hedge fund holder of the company in Q2. The short interest data shows that the short percentage of float sits at 1.08%, as of August 31. The low short interest percentage highlights minimal short positioning.
Cramer’s perspective highlights why long-term believers are willing to look past near-term guidance jitters when dealing with an essential piece of the AI infrastructure. While managing cyclical semiconductor exposure and shifting tech budgets requires patience, a compressed multiple of 18.1x along with massive multi-year tailwinds suggests the recent selloff could represent a rare entry point for a proven market leader like Broadcom Inc..
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