Broadcom is a strong contender in the AI market with diversified portfolio and upcoming stock split.

From Nasdaq: 2024-07-04 06:40:00

Artificial intelligence (AI) stocks, like Nvidia, are soaring in popularity after the success of OpenAI’s ChatGPT. Nvidia is enacting stock splits to make shares more accessible, but Broadcom (NASDAQ: AVGO) is also a strong contender in the AI market, offering custom chips for specific use cases. This diversification could make Broadcom a solid investment choice.

Unlike Nvidia, Broadcom focuses on custom chips tailored to clients’ needs, rather than high-end GPUs. While this may require upfront costs, the long-term benefits include cost and power advantages. Notable clients include Alphabet and Bytedance, with Broadcom’s custom chips offering solutions amidst export controls that limit access to Nvidia’s GPUs.

Broadcom’s business is not solely AI-focused, providing semiconductor services to various industries for stability. The recent acquisition of VMware helped boost revenue by 43% year-over-year to $12.49 billion. This diversification into infrastructure software can further support Broadcom’s growth and financial performance in the market.

With a 10-for-1 stock split planned for July 15, Broadcom is becoming more appealing to smaller investors. Despite massive growth in recent years, Broadcom still offers a comparatively low forward P/E of 28, making it a more affordable option than competitors like Nvidia. This, coupled with its diverse portfolio, makes Broadcom an attractive investment opportunity.

While Broadcom may not be featured on The Motley Fool’s list of top 10 stocks to buy now, its potential for growth and stability cannot be overlooked. Diversification across industries, a strong client base, and an upcoming stock split all make Broadcom a stock worth considering for long-term investment.

Disclosure: The author has no positions in any mentioned stocks. The Motley Fool recommends Broadcom, Advanced Micro Devices, Alphabet, and Nvidia. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.



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