Broadcom: Riding the AI Wave to Transformative Growth

The semiconductor industry is at the forefront of technological advancements in 2025, driven by the rapid growth of artificial intelligence (AI), cloud computing, and high-performance computing. AI adoption is transforming industries globally, creating unprecedented demand for custom silicon and networking solutions to power next-generation workloads.

Industry forecasts suggest sustained double-digit growth in AI-related semiconductor markets, fueled by innovations in generative AI and expanding use cases across healthcare, finance, and entertainment.

In this competitive and dynamic environment, Broadcom (AVGO) is emerging as a key player, leveraging its expertise in custom silicon and infrastructure software to secure a strong foothold in the AI revolution.

Broadcom’s Financial Firepower

In FY24, Broadcom reported record-breaking revenue of $51.6 billion, marking a 44% year-over-year increase. The semiconductor segment contributed $30.1 billion, with AI revenue alone surging by 220% to $12.2 billion, now accounting for 41% of the semiconductor segment's revenue. The infrastructure software segment, bolstered by the VMware acquisition, contributed $21.5 billion, up 181% year-over-year. Broadcom also demonstrated strong profitability, with a gross margin of 76.9% and an operating margin of 63% in Q4 FY24.

AI and Custom Silicon: Broadcom’s Core Growth Drivers

Broadcom's custom silicon and AI solutions are key growth drivers. The company’s application-specific integrated circuits (ASICs) and AI XPUs cater to hyperscale clients like Google and Meta, delivering tailored solutions for specific AI applications.

Networking solutions, such as the Tomahawk and Jericho chips, are also integral to AI clusters, with AI networking revenue rising 158% year-over-year in Q4 FY24.

The broader adoption of generative AI continues to drive demand for these products, positioning Broadcom for sustained growth.

The VMware Advantage

The VMware acquisition has significantly enhanced Broadcom’s capabilities in the infrastructure software space. This integration resulted in a 196% year-over-year growth in the segment, showcasing the synergy between Broadcom’s hardware and software offerings.

Additionally, VMware’s strong operating margins and reduced operating expenses are expected to contribute to further profitability improvements.

Risks and Challenges

Despite its strong position, Broadcom faces notable risks. The company relies heavily on three hyperscale clients, which exposes it to potential revenue volatility if these clients reduce spending or switch suppliers.

Furthermore, competition from NVIDIA remains a key challenge, especially as NVIDIA explores custom silicon offerings. Broadcom’s exposure to China, which accounts for over 30% of its revenue, also makes it sensitive to geopolitical tensions and trade tariffs.

Future Outlook and Projections

Looking ahead, Broadcom is projecting AI revenue of $60–$90 billion by FY27, supported by continued growth in custom silicon and networking solutions.

The company’s expected earnings per share (EPS) growth of 21.7% CAGR over the next three to five years underscores its strong growth trajectory. While the stock trades at a premium, its leadership in AI-related markets makes it a compelling option for investors seeking exposure to the AI infrastructure space.

(Insert Technical Analysis Chart)

• The chart shows an upward trend for AVGO, with higher lows and higher highs evident over the past months. Currently consolidating after a recent breakout above key resistance levels.

• Key support level where previous consolidation occurred around $210.00

• A deeper support level near the 200-day Simple Moving Average (SMA), which has historically held as strong support around the 180.00 level.

• Highlights multiple “1GT” buy signals, suggesting alignment with a trending using the 1GT indicator. Coinciding with upward momentum or trend continuation.

• If the stock sustains above $210.00, Potential target around the $250.00 (+18%~) in the short term.

• Beyond $250.00, the next potential target is $280.00 (+11%~), as indicated by the chart's highlighted price boxes.

Conclusion

In conclusion, Broadcom is well-positioned to capitalize on the ongoing AI revolution. The company’s focus on custom silicon, robust software capabilities, and strategic acquisitions provide a solid foundation for growth. While challenges such as client concentration and competition persist, Broadcom’s strong fundamentals and market position make it an attractive investment in the semiconductor sector.

Hope you have found the above content useful 😃 

If you have yet to be a part of Joey’s VIP clients in Phillip Securities receiving his Exclusive WhatsApp Broadcast daily, you can check it out here!

Joey and team post Top SG Stock Ideas, Market Updates, Research Reports and training videos on a daily basis at NO additional cost.

Look forward to see you on the inside!

- Joey, Bervyn & Zee

Sources:
1.Broadcom Likely To Keep Custom AI Chip Lead Thanks To Incumbency. Available at: https://www.investors.com/news/technology/broadcom-stock-avgo-custom-ai-chip-business/?utm_source=chatgpt.com
2. Broadcom Inc. (AVGO) Poised for Strong 2025 Growth with Custom AI Chips and Strategic Partnerships, Says William Blair. Available at: https://finance.yahoo.com/news/broadcom-inc-avgo-poised-strong-141951681.html
3. Is Broadcom the New King of AI?. Available at: https://wallstreetpit.com/121770-is-broadcom-the-new-king-of-ai/

Note that by subscribing to receive any of Joey's training by email, you agree to allow us to send you the training by email. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. If the investment is denominated in a foreign currency, factors including but not limited to changes in exchange rates may have an adverse effect on the value, price or income of an investment. Past performance figures as well as any projection or forecast used in these web pages, are not necessarily indicative of future or likely performance of any investment products. By Accessing this Website and ANY of its pages, you are agreeing to the terms set out ON ALL the following pages as seen below. Copyright © | Joey Choy | All Rights Reserved | Disclaimer | Privacy & Security Policy | Terms and Conditions