Broadcom: The Market Has It Wrong

Louis Gerard 3.91K Followers Follow Summary Broadcom is upgraded to Strong Buy after a post-earnings selloff, with valuation now compelling versus growth prospects. Q4 guidance implies 93% sales growth, with AI semiconductor revenue set to reach $21.7B, up 236% Y/Y, and FY2026 AI revenue targeted at $59B. Gross margin compression is offset by operating leverage, as incremental AI revenue is highly accretive to operating profit despite lower gross margins. Concentration risk exists with Anthropic and OpenAI as top XPU customers, but AVGO’s capital allocation and off-balance-sheet financing support aggressive AI capacity expansion. JHVEPhoto/iStock Editorial via Getty Images Introduction It has been quite a long time since I last covered Broadcom ( AVGO ), one of the great winners of the AI boom. Yet despite all of the good developments for the firm, such as This article was written by Louis Gerard 3.91K Followers Follow As a detail-oriented investor with a strong foundation in finance and business writing, I focus on analyzing undervalued and disliked companies or industries that have strong fundamentals and good cash flows. I have a particular interest in sectors such as Oil&Gas and consumer goods. Basically, anything that has been unloved for unjustified reasons that could offer substantial returns. Energy Transfer is one of those companies that I came across when no one wanted to touch it and now I can't resolve myself to sell it. I will always focus more on long-term value investing but I can sometimes lose myself in possible deal arbitrage such as with Microsoft/ Activision Blizzard, Spirit Airlines/Jetblue (that one still hurts), and Nippon/U.S. Steel (perfect exit at $50.19). I tend to shun businesses that I can't understand either high-tech or certain consumer goods such as fashion (give me a Levi's jeans). I don't understand why anyone would invest in cryptocurrencies as well. Through Seeking Alpha, I aim to connect with like-minded investors, share insights, and build a collaborative community of individuals seeking superior returns and informed decision-making, currently on a quest to review every public company. Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVGO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.