Broadcom’s Shares Jump 37.2% Amid Strong AI Developments

Broadcom (AVGO) shares have surged 37.2% over the past month, driven by a growing product lineup, a robust partner network, a solid VMware business, a strong balance sheet, and impressive free cash flow. In comparison, major semiconductor competitors such as NVIDIA (NVDA), Advanced Micro Devices (AMD), and Marvell Technology (MRVL) have seen their shares rise 35.6%, 32.6%, and 21%, respectively, during the same period.

Recent Stock Performance

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Broadcom’s proactive approach in updating its product portfolio has played a significant role in its recent success. The company recently debuted its third-generation 200G per lane (200G/lane) Co-Packaged Optics product line. In April, it introduced Incident Prediction, enhancing the security features of Adaptive Protection in Symantec Endpoint Security Complete (SES-C). This follows the earlier showcase in March of advanced products at the 2025 Optical Fiber Communications Conference and Exhibition (OFC).

Strong demand for Broadcom’s application-specific integrated circuits (ASICs), which are crafted for AI and machine learning, continues to bolster its revenue growth. Major clients like Alphabet and Meta Platforms utilize Broadcom’s ASICs. In particular, custom AI accelerators (XPUs) are essential for training Generative Artificial Intelligence (GenAI) models. These XPUs require intricate integration of computing, memory, and input/output capabilities, aiming for improved performance with reduced power usage and cost.

At OFC, Broadcom revealed the industry’s first 6.4-Tbps optics attach for XPU, facilitating high bandwidth and long-reach connectivity for AI servers. The company is also gearing up for volume shipments of its next-generation 3-nanometer XPUs, marking a first in the industry for that process node, expected in the latter half of fiscal 2025. Future plans include the development of the first 2-nanometer AI XPU packaging using 3.5D technology, targeting clusters of 500,000 accelerators for large-scale customers.

AI Market Potential and Strategic Partnerships

Broadcom identifies substantial opportunities within the AI sector, particularly as three major hyperscaler clients initiate their own XPU development. By 2027, these clients aim to deploy 1 million XPU clusters across shared infrastructure. The Serviceable Addressable Market for XPUs and networks could reach between $60 billion and $90 billion in fiscal 2027 alone.

The company’s commitment to proactive, AI-powered security positions it well against evolving cyber threats. In March 2025, Broadcom updated VMware vDefend to enhance security planning, lifecycle management, and scalability, incorporating tools like Security Segmentation Assessment and optimized micro-segmentation.

Broadcom also boasts a diverse partner network, including NVIDIA, Arista Networks, Alphabet, Dell Technologies (DELL), Meta Platforms, Juniper, and Supermicro. This collaboration is expected to propel significant AI revenue growth, with forecasts indicating a 44% year-over-year increase in AI revenues to $4.4 billion for the second quarter of fiscal 2025. Additionally, semiconductor revenue is anticipated to rise 17% year-over-year to $14.9 billion.

Strong Financial Position Boosts Shareholder Returns

Broadcom enjoys a robust balance sheet, bolstered by substantial cash flow. As of February 2, 2025, the company reported $9.31 billion in cash and cash equivalents and generated $6.11 billion in cash from operations. The free cash flow reached $6.01 billion, representing 40% of total revenue by the end of the first quarter of fiscal 2025.

This financial strength enables Broadcom to maintain consistent dividend payments and engage in share buybacks. Recently, Broadcom’s board approved a new repurchase program, allowing for the buyback of up to $10 billion in common stocks through December 31, 2025.

Positive Earnings Forecast

The Zacks Consensus Estimate for fiscal 2025 earnings stands at $6.60 per share, up 4 cents over the last 60 days, indicating a 35.52% growth compared to the previous year.

Price and Consensus Trends

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

The consensus estimate for the upcoming fiscal second-quarter earnings is set at $1.57 per share, reflecting a 42.73% year-over-year growth and an increase of one cent over the past 60 days.

AVGO Shares Trading at a Premium

AVGO shares are currently trading at a premium, indicated by a Value Score of D. The forward 12-month Price/Sales ratio for AVGO stands at 16.05X, exceeding the sector average of 6.14X, as well as NVIDIA’s 15.79X, AMD’s 5.44X, and Marvell Technology’s 6.08X.

Conclusion

Broadcom’s increasing AI portfolio, combined with its diverse partnerships, showcases strong growth potential. These factors support the company’s premium valuation. Currently, Broadcom holds a Zacks Rank #2 (Buy) and a Growth Score of A, indicating a favorable investment outlook.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.