Is Broadcom a Buy After Falling 9% in One Day?
The recent drop in Broadcom stock does not align with its fundamentals.
Broadcom (AVGO) experienced a 9% decline in its stock price, driven by AI fears intensifying in October. With revenue rising 48% year-over-year, the AI semiconductor segment surged by 143% and accounted for almost half of total sales. Broadcom anticipates a significant 3-fold increase in AI semiconductor revenue for its fiscal 2026 Q3, with projections of $115 billion sales and potential doubling to $230 billion in fiscal 2028.
The earnings per share (EPS) guidance of over $30 for fiscal 2028 translates to a forward P/E ratio below 10, indicating an attractive valuation. Despite potential regulatory changes under a Democrat-controlled midterm, the AI buildout continues, creating new data centers and jobs, with multinational tech firms investing globally.
While Nvidia dominates GPUs, Broadcom excels in Application-Specific Integrated Circuits (ASICs), crucial for data centers. With tech spending on the rise, Broadcom remains well-positioned for growth in the AI boom, making it a potentially attractive buy for long-term investors.
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