Broadcom’s Stock Recovery: A Strategic Move for Investors
Chicago, IL – March 21, 2025 – Zacks Investment Ideas presents a spotlight on Broadcom Inc. (AVGO), Meta Platforms Inc. (META), and Nvidia Corp. (NVDA).
Consider Buying Broadcom as it Declines 25% Before Potential Rebound
Broadcom Inc. is positioned advantageously in the semiconductor and infrastructure software sector, capitalizing on the rapid growth driven by artificial intelligence (AI). In its recently announced Q1 FY25 results, AVGO reported a remarkable 77% increase in AI sales.
Over the past decade, Broadcom stock has surged more than 1,300%, significantly outperforming the tech sector. In the last two years alone, it has gained 200%. It briefly crossed the $1 trillion market cap, joining industry giants like Nvidia and Apple.
After an intense rally following a robust earnings report in early December, Broadcom’s stock has retreated nearly 25% from its all-time highs, suggesting a strategic buying opportunity as it approaches important technical support levels. With vast AI growth potential and long-term opportunities across various industries, now could be the right time to invest.
Broadcom: A Consistent Performer Among Tech Giants
Broadcom’s semiconductor products are integral to diverse applications, such as telecommunications, smartphones, data centers, and enterprise networking. Additionally, AVGO has expanded into enterprise software, incorporating cybersecurity and hybrid cloud infrastructure solutions to serve a broad client base.
Acquiring VMware in November 2023 played a crucial role in enhancing Broadcom’s capabilities in software and cloud infrastructure.
As a leader in networking processors, Broadcom oversees critical connections within data centers, supporting Nvidia’s AI chip deployments. It collaborates with major tech players including Meta in designing application-specific integrated circuits (ASICs) tailored for AI tasks, paralleling Nvidia’s advancements.
During its Q1 earnings call on March 6, Broadcom revealed that it partners with three major AI hyperscalers—companies operating extensive AI data centers, such as Meta, Alphabet, and Amazon—that could create a Serviceable Addressable Market (SAM) between $60 billion and $90 billion by fiscal 2027. Furthermore, two additional hyperscalers have contracted Broadcom to develop custom accelerators for next-generation AI models.
Examining Broadcom’s Growth Trajectory
Broadcom’s 77% jump in AI sales during Q1 FY25 resulted in an overall 25% revenue increase and a 45% rise in earnings per share (EPS).
This impressive AI growth has counterbalanced declines in its non-AI semiconductor segments, which include industrials and wireless. Despite facing cyclical challenges, AVGO’s first quarter performance prompted upward revisions in its earnings outlook, earning a Zacks Rank #2 (Buy). Analysts expect adjusted EPS to grow by 35% in 2025 and 18% in 2026 after a 15% increase in the previous year.
CEo Hock Tan noted that AVGO anticipates continued strength in AI semiconductor revenues for Q2, driven by investments in AI XPU and connectivity solutions from hyperscale partners.
Revenue growth projections for Broadcom stand at 20% for FY25 and 15% for FY26, bolstered by a significant 44% expansion in 2024.
Is Now the Right Time to Acquire This Undervalued AI Stock?
Broadcom’s stock has surged over 9,000% in the past 15 years, significantly outperforming tech’s broader 500% increase and trailing only Nvidia and Tesla within the “Magnificent Seven” stocks. Recent declines still allow investors to consider purchasing AVGO shares, which have dipped about 25% from their peak in early December.
The stock’s rapid rise after its Q4 results in December led to a necessary sell-off, and its decline aligns with the broader downturn affecting AI stocks. AVGO’s recent drop coincided with an overall cooling in the stock market, erasing virtually all its gains since Q4.
The stock has retreated from overheated Relative Strength Index (RSI) levels to some of its lowest in recent years. Currently, it’s finding support near its 50-week line, coinciding with the 200-day moving average, approaching a previous breakout range.
Broadcom still trades at a premium compared to the tech sector based on forward earnings but aligns closely on the Price/Earnings-to-Growth (PEG) ratio. Furthermore, the company offers dividends, and 30 of the 34 brokerage ratings highlighted by Zacks are “Strong Buys.”
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