Shares of Broadcom (AVGO) have continued to grab attention on Wall Street as the AI infrastructure wave broadens out past GPUs and into semiconductor packaging innovations.
As the latest catalyst, Applied Materials Inc. (AMAT) revealed that Broadcom had become its latest partner under its EPIC platform for developing cutting-edge innovations in AI chip packaging. The collaboration adds further fuel to a burgeoning trend: AI performance is becoming not only a function of computing capabilities, but also efficient interconnects between multiple chips within the system.
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About Broadcom Stock
Broadcom Inc. is one of the largest semiconductor firms and infrastructure software companies in the world. With headquarters located in Palo Alto, California, Broadcom produces customized AI accelerators, networking chips, connectivity, and enterprise infrastructure software products. As of the writing, Broadcom boasts a market cap of nearly $1.96 trillion.
The shares of AVGO stock have performed extremely well over the past 12 months. Broadcom was recently trading at $414.74 per share, representing growth of about 86% compared to a 52-week low of $226.18 and only modestly lower than a high of $442.36 recently. AVGO has decisively outperformed the S&P 500 Index (SPY) as investors continue favoring AI infrastructure stocks.
Although it trades at relatively high valuations, much of that is due to the strength of Broadcom’s business model and growth profile. For example, Broadcom trades at 41.24x forward earnings and 30.46x sales. Moreover, the price-earnings multiple has come in at 68.97x, which may seem relatively high based on conventional semiconductor competitors. However, Broadcom boasts extremely high margins, posting a profit margin of 36.2% and an adjusted EBITDA margin of nearly 68%.
Broadcom is also quite friendly toward its shareholders through dividend payments and buybacks. Broadcom pays a dividend of $0.65 per quarter to stockholders and is executing a significant buyback program amid strong cash flows.
