Investors should consider taking a reasonably sized position in Broadcom stock.
Custom artificial intelligence chip designer Broadcom (NASDAQ:AVGO) captured the headlines when the company announced a 10-for-1 stock split. However, that split is in the history books now. Yet, investors can still find current and future positive catalysts for Broadcom stock.
After all, Broadcom expects to generate a whopping $51 billion in fiscal-2024 consolidated revenue. This could be just the beginning of a much bigger revenue-generation opportunity for Broadcom, though. So, at the end of the day, you just might discover some compelling reasons to bet a few chips on Broadcom.
Broadcom stock gets a “B” grade instead of an outright “A” for now, and it’s prudent to enter any share positions gradually. Bear in mind, there are international frictions that might cause problems for chip companies like Broadcom.
For example, former president and current presidential candidate Donald Trump reportedly said that Taiwan took “about 100%” of America’s “chip business,” and added, “I wouldn’t feel so secure right now, if I was them.”
Also, the Biden administration may increase restrictions on U.S.-made semiconductor and semiconductor equipment exports to China (though this news may be less relevant now that President Joe Biden has ended his reelection campaign).
International tensions could be “bad news,” but it’s also possible that these frictions will be resolved. Broadcom’s current and prospective investors should keep these issues in mind and adjust their share positions accordingly.
On the other hand, there’s potentially good news pertaining to Broadcom. According to The Information (via Bloomberg), Broadcom “discussed making an artificial intelligence chip for” OpenAI.
That’s big news, of course. OpenAI is famous for developing the popular generative AI chatbot known as ChatGPT. Businesses across multiple sectors are practically scrambling to integrate OpenAI’s gen-AI technology. Thus, it would be a game-changing development if Broadcom does actually get an opportunity to make AI chips for OpenAI.
Speaking of opportunities, per Barron’s, JPMorgan Chase analyst Harlan Sur envisions Broadcom as possibly generating “$150 billion in cumulative AI revenue over the next five years.”
This, according to the calculations of JPMorgan Chase analysts, “would equate to a 30% to 40% annual growth rate for the AI segment for Broadcom.”
Of course, there’s no way to guarantee that Broadcom’s AI revenue will actually expand at that rate. Yet, the company managed to grow its second-quarter fiscal 2024 consolidated revenue by 43% year over year.
So, anything’s possible and Sur’s expectations, while optimistic, aren’t necessarily unrealistic.
The excitement over Broadcom’s share split has mostly faded by now. Moreover, Broadcom’s investors should keep tabs on international issues that could negatively affect U.S. chipmakers.
At the same time, Broadcom might enter into a potent partnership with gen-AI superstar OpenAI. In addition, Broadcom may be able to capture AI revenue valued at $150 billion or more in the coming years. Hence, Broadcom stock earns a “B” grade and investors can mitigate their risk by staying small in their position sizes.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.