Bulls vs. Bears: How long can Broadcom ride the AI gravy train?

Broadcom (NASDAQ:AVGO) shares have more than doubled this year, including a 24% rise on Friday on the back of the semiconductor company’s Q4 FY24 results, which exceeded expectations as Wall Street focused on its custom AI potential.

While the earnings-led rally pushed the Palo Alto-based tech giant past $1T in market capitalization, Seeking Alpha analysts had various views on how long the latest member to the elite 13-figure club can sustain its momentum.

The Bulls

“The company’s AI segment is booming, with 220% YoY growth and partnerships with three large customers, aiming for a $75 billion market opportunity by 2027,” argued SA Investing Group leader The Value Portfolio in “Broadcom Will Benefit From Taking Nvidia And AMD’s Largest Customers (Rating Upgrade).” “The company will be able to grow its FCF and earnings to justify its valuation, resulting in a ratings upgrade from our side. We now see Broadcom as a valuable investment proposition.”

“Despite a high valuation, Broadcom’s expanding free cash flow margins and top line momentum suggest significant long-term upside in the AI sector,” added SA analyst The Asian Investor in “Broadcom: Why This Rally Is Not Over Yet.” “While shares are not cheap, they certainly have considerable long term growth potential.”

“Despite a valuation that is a bit rich, I think this stock is one to buy and hold for investors with a long-time horizon,” wrote Kumquat Research in “Broadcom Earnings: This Train Cannot Be Stopped.” “AI revenue continues to drive top line and earnings growth. Best-in-class margins and cash flow make AVGO stock worthy of a Buy,”

The Bears

“Although I have conviction in Broadcom’s strong fundamentals and technological prowess to scale its custom AI chips and networking opportunities, the stock isn’t immune to pullbacks,” opined SA Investing Group leader JR Research in “Broadcom: Don’t Let Your AI Enthusiasm Go Overboard (Rating Downgrade).” “Hence, I believe it’s timely for me to return to the sidelines as we await another opportunity to buy AVGO on pullbacks.”

“Broadcom’s valuation at 38x forward free cash flow is high, making me cautious despite its strong earnings and impressive profitability metrics,” added SA Investing Group leader Michael Wiggins De Oliveira in “Broadcom Q4 Earnings: Why I’m Now Sticking To The Sidelines.” “While I admire Broadcom’s execution and innovation, I’ll remain on the sidelines until a more compelling risk-reward balance emerges.”