As Broadcom ( AVGO ) prepares to report earnings next week, Bernstein Managing Director and Senior Analyst Stacey Rasgan joins Market Domination to discuss her bull case on the company.
Rasgan explains that Broadcom has several different business segments, from semiconductors and software to infrastructure. “They also have what I would call the second best AI story in the space I think after Nvidia,” he added. He breaks down how Broadcom partners with tech giants like Google ( GOOG , GOOGL ) and META ( META ), which are building and scaling their own chips.
He adds, “[AI] Networking is, obviously, as important as computing. And they're the 800-pound gorilla out there.” He points out that Broadcom's current guidance for its AI revenue this year is more than $10 billion, about a third of its overall semiconductor business.
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This post was written by Melanie Riehl.
Video transcript
Let's switch gears.
Um also for our last question because I want to ask about Broadcom, which is reporting next week.
You recently came out with a note and said you like it for people who aren't as familiar with Broadcom.
Where does it fit into this whole new AI universe and why are you excited about it?
Yes, you bet.
So Broadcom does a lot of things.
They have a semiconductor business, they have a software business, they do a lot of infrastructure work.
They also have what I would call the second best AI story in the space I think after NVIDIA, um you know, the, the, the, one of NVIDIA's competitive factors is actually big hyper. Like Scalar, the Googles and metas of the world are actually making their own chips and in most cases, they rely on other external partners to help them do it.
And Broadcom is one of those partners, Broadcom does AI chips for Google, Google calls them TP US.
He has been working with Google for eight or nine years.
They are also working with Meta.
They are working with a third customer that they recently disclosed.
Um they also do AI networking for um Ethernet, for big language models and, and generative AI and networking is clearly as important as compute and they're 800 gorillas there.
And their current guidance for their AI revenue this year is more than $10 billion of the $30 billion semiconductor they're looking for this year.
So that's about a third of their semiconductor business.
Um, they're looking for this year's AI quote.
And again, from what we've seen from everybody in AI, it's one of the few end markets that's doing really, really well.
Um, all of these people are looking at an upward bias in their numbers which makes 10 billion seem pretty conservative to me, but it's what I would call, as I said, the second best AI in the space after NVIDIA. Story.