Investors Eye Resilient Market as AI Infrastructure Grows

This year has presented challenges for investors. Less than a month ago, the S&P 500 was down as much as 15%, while the tech-heavy Nasdaq Composite fell even more—dropping by 21%. However, recent weeks have shown signs of recovery as capital markets gradually rebound. Currently, the S&P 500 is near breakeven for the year, with the Nasdaq down only 3%. A significant factor contributing to this resurgence has been the quarterly earnings reports. Throughout April, companies disclosed their financial results for the first quarter of 2025, and investors generally appear satisfied with the outcomes.

Strong Performance from AI Companies

Notably, artificial intelligence (AI) companies have reported solid earnings for Q1, coupled with robust outlooks. Major cloud hyperscalers such as Amazon, Microsoft, and Alphabet have maintained their capital expenditure (capex) guidance for the year. In addition, Meta Platforms has increased its AI infrastructure outlook. As a result, this positive momentum benefits GPU manufacturers like Nvidia and Advanced Micro Devices.

As Nvidia prepares to report earnings on May 28, I’m watching another semiconductor stock, Broadcom (NASDAQ: AVGO), which presents a compelling opportunity this month.

Rising AI Infrastructure Stimulates Demand for Broadcom

The projected AI infrastructure spending among cloud providers and Meta is expected to surpass $300 billion this year. While much of this budget will be directed towards GPUs from Nvidia and AMD, the “Magnificent Seven” companies are also developing their in-house chips. Broadcom’s custom silicon offers a unique solution, making the increase in AI capex a positive indicator for the company.

During the earnings call in March, Broadcom CEO Hock Tan noted that the firm surpassed its AI revenue target due to increased shipments of networking solutions to hyperscalers. As Amazon, Microsoft, and Alphabet expand their data centers with AI GPUs and networking equipment, Broadcom is likely to play a key role in this infrastructure development.

Image source: Getty Images.

Why Management’s View on Broadcom Stock Matters

The chart below tracks Broadcom’s share price movement since its last earnings report on March 6. While some might attribute these gains to a favorable earnings report, I believe other factors are influencing the price movement.

AVGO data by YCharts

All the gains depicted in the chart occurred after March. What spurred this change?

On April 7, Broadcom announced a $10 billion share buyback plan, which will run through December 31. The company is not obligated to repurchase any stock, yet should they choose to, the window is limited to the remainder of the year. This announcement coincided with a wave of favorable earnings reports and increasing investments in AI infrastructure, indicating that management anticipates a rebound for Broadcom shares in the latter half of the year driven by sustained strength in the AI sector and demand from hyperscalers.

Is Broadcom Stock a Smart Buy Now?

Broadcom’s earnings report is set for June 5. By then, all companies in the Magnificent Seven, along with AMD, will have released their financial results. A common theme among these firms is that their AI divisions are thriving. I expect Broadcom to follow suit.

If Nvidia’s upcoming earnings report is similarly positive, it could elevate Broadcom shares alongside the broader market. Investors should also gain insight into whether the recent spike in Broadcom’s stock could be associated with the share buyback.

For these reasons, I believe now is an opportune moment to consider buying Broadcom stock before the upcoming earnings report in early June.

Should You Invest $1,000 in Broadcom Now?

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Views expressed herein reflect those of the author and do not necessarily align with Nasdaq, Inc.