History Says Now Is the Perfect Time to Buy Broadcom Stock
Broadcom(NASDAQ: AVGO) shares have suffered a weak end to the summer. The stock has tumbled about 30% from its all-time high, set in early June, and is about flat since Jan. 1. However, I think this is a huge mistake on the part of investors.
The semiconductor giant has major momentum, and it's easy to see why. More and more companies are opting for Broadcom's custom AI chips, rather than broad-purpose graphics processing units (GPUs). This will cause Broadcom's business to boom and make for a bright future.
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With the stock selling off in recent months, now looks to be an ideal time to add to existing positions or open a new one.
Broadcom expects huge growth over the next few years
Broadcom is a bit newer to the AI computing industry compared to some of the incumbents, but it's making a huge splash. Its custom AI chips are being used heavily by companies like Alphabetand are popular with AI companies like Anthropic. Its custom AI chips can deliver better cost performance versus traditional GPUs if the workloads are properly configured, which makes them very popular.
Broadcom's management is seeing huge demand, and noted that its AI semiconductor revenue is projected to reach $115 billion in 2027. For reference, the company just crossed $16 billion in quarterly revenue for this segment last quarter. That figure is expected to double again in 2028 to $230 billion, and Broadcom has informed investors that it has secured the supply chain necessary to support this massive expansion.
That's huge growth in a short time frame, yet the market isn't buying any of that bull case. Broadcom's shares trade at 28 times this year's earnings estimates, but only 17 times next year's.
AVGO P/E Ratio (Forward) data by YCharts. P/E = price-to-earnings.
This means that none of next year's huge growth is priced into the stock, let alone 2028's. Broadcom's cheap stock price from the sell-off, combined with massive growth rates, could result in Broadcom being one of the better AI investments to make right now. Unless something massive happens with the AI build-out, current plans indicate that Broadcom's stock could easily double or triple over the next few years.
Finding stocks that can do that is rare, let alone ones that are attractively priced like Broadcom is. As a result, I think it's one of the best buys investors can make on the market right now, and investors will be glad they purchased shares while it was beaten down.
Should you buy stock in Broadcom right now?
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Keithen Drury has positions in Alphabet and Broadcom. The Motley Fool has positions in and recommends Alphabet and Broadcom. The Motley Fool has a disclosure policy .
History Says Now Is the Perfect Time to Buy Broadcom Stock was originally published by The Motley Fool
