From Nasdaq: 2024-08-01 13:19:00

Broadcom (AVGO) shares have dropped 6.3% since its 10-for-1 split on Jul 15, linked to concerns about AI chip prospects. Peers NVIDIA (NVDA) and AMD also saw declines, but AMD’s strong Q2 results, driven by AI chip demand, led to a share price increase for all three companies.

AMD’s Q2 results showed continued strong demand for AI chips and a significant increase in GPU and CPU sales. AVGO’s strong portfolio, including AI infrastructure solutions, enabled it to double sales in the AI backend fabric, with revenue expected to exceed $11 billion for fiscal 2024. AVGO’s latest offerings, like the Jericho3-AI fabric and 400G PCIe Gen 5.0 Ethernet adapters, have boosted its dominance in the AI infrastructure market.

Broadcom’s expanding clientele, including Alphabet and Meta Platforms, was notable as they embraced AVGO’s solutions for AI and machine learning tasks. However, estimate revisions show a downward trend in earnings, with AVGO’s stock trading at a relatively high Price/Sales ratio. Despite growth potential, AVGO’s Growth Style Score suggests growing uncertainties and a stretched valuation, making it a risky investment.

In conclusion, while Broadcom’s strong portfolio and clientele point to long-term growth potential, concerns about broadband and server storage markets could hinder short-term prospects. With a Zacks Rank of 3 (Hold), waiting for a more favorable entry point may be prudent. The Value Style Score of D and high Price/Sales ratio signal a cautious approach, despite AVGO’s solid top-line growth outlook.



Read more at Nasdaq: Can Broadcom (AVGO) Regain Momentum After 6% Dip Post-Stock Split?