Summary
- As the constraint in AI data centers shifts from compute to networking capacity and performance, Broadcom finds itself ideally positioned to capitalize o…
Summary
- As the constraint in AI data centers shifts from compute to networking capacity and performance, Broadcom finds itself ideally positioned to capitalize on AI networking constraints.
- The company is winning multi-billion dollar deals worth of new business from big AI industry names. I expect growth acceleration in organic revenues to ~35% YoY in FY26.
- Customer concentration risk remains a key monitorable, as 40-50% of revenues come from a few hyperscalers.
- AVGO stock is richly valued at a 62.9% valuation premium to semiconductor peers but it is encouraging to see this backed by rising earnings expectations.
- A bullish technical chart on AVGO vs. SPX500 supports the case for continued upside and outperformance.
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Performance assessment
Broadcom (AVGO) has outperformed the overall market since my last update on the stock:
Thesis
I am now adding to my buys on AVGO stock. Here’s the view:
- Broadcom is well positioned to
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Quick Insights
The $10 billion OpenAI deal is expected to drive sharp revenue acceleration, with organic revenues projected to grow ~35% YoY in FY26.
Customer concentration among hyperscalers exposes AVGO to potential revenue losses or gross margin erosion if clients switch away from AVGO or gain negotiating power.
While AVGO trades at a 62.9% premium to peers, rising earnings expectations and robust AI-driven demand help justify the elevated multiple.