Another artificial intelligence (AI) stock split is coming. Could Broadcom Be the Next Nvidia?

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If you believe its hype, artificial intelligence (AI) is one of the most profound advances in technology ever. That may be hyperbole — time will tell — but it's already clear that the technology has commercial power. Its influence in the market has been enormous, with its champions, Nvidia (NASDAQ: NVDA )participation apple And Microsoft As is one of the largest companies in the world.

Nvidia's rise led to the company splitting its stock 1-for-10, opening the door to more investors with lower valuations. Now another company working in AI is also splitting its stock. Broadcom (NASDAQ: AVGO )which designs, manufactures and sells the hardware and network infrastructure that allows AI programs to run, will split its stock later this summer.

So let's consider: Can Broadcom deliver the same returns as Nvidia?

Revenue growth has been impressive, but fueled by a major acquisition.

Broadcom is in growth mode, growing Q1 revenue by 43% from Q2 2023 to 43%.

AVGO Revenue (Quarterly) Chart

Notice the recent increase in mass? The inflection point at the end of 2023 is significant. This growth isn't really organic — much of it is coming from acquisitions. The company bought VMware, a highly successful cloud software company, in November 2023 for $69 billion, boosting Broadcom's revenue.

Excluding that additional revenue from VMware, the company grew Q2 revenue by 12% on a year-over-year basis, not as eye-watering as the headline 43%.

Looking at future earnings, the company looks reasonably valued.

Still, 12% organic growth is nothing and reflects Broadcom's growing AI-focused business. Communication within the AI ​​server that powers platforms like ChatGPT is a key aspect and is where Broadcom shines. Its PCIe and Ethernet technology is some of the best on the market. This made his product popular.

“Revenue from our AI products was a record $3.1 billion during the quarter,” Broadcom President and CEO Hock Tan said in the company's latest earnings release. A growing AI business and solid acquisitions mean the company expects to continue delivering record revenue. It raised its guidance for this year to $51 billion in revenue, up 42 percent from 2023.

So what does this mean for how much a company is worth? If we look at its forward P/E, the company looks pretty solid at around 34. That's in line with the big tech and significantly lower than Nvidia's 48.

Broadcom is a solid company, but it will have trouble competing with Nvidia.

Broadcom's growth prospects, while promising, are not comparable to Nvidia's in my opinion. Nvidia is growing revenue at a pace that far outpaces Broadcom and is doing it organically, not relying on expensive acquisitions. Consensus estimates have Nvidia more than doubling Broadcom's revenue by the end of this fiscal year and again next year.

And this disparity will be even greater when looking at net income. Look at the difference from last year.

AVGO Net Income (TTM) Chart

It's not just acquisitions that affect this. Nvidia expects to operate with roughly 20% better margins than Broadcom this year.

Numbers aside, Nvidia has shown immense vision as a pioneer in AI. Although difficult to quantify, I think visionary leadership is a factor that cannot be underestimated. As the industry matures and competition increases, Nvidia's leadership could help it maintain its dominant position.

At the end of the day, however, Broadcom is still a good investment with a solid track record and promising prospects. Is this the next Nvidia? I don't think so, but it doesn't have to be.

Should you invest $1,000 in Broadcom now?

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Johnny Rice has no position in any stocks. The Motley Fool holds positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.

Another artificial intelligence (AI) stock split is coming. Could Broadcom Be the Next Nvidia? Originally published by The Motley Fool.

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