Broadcom remains a compelling long-term investment, particularly in the rapidly evolving sectors of cybersecurity, cloud computing, and artificial intelligence (AI). After a challenging period for the market, marked by only 27% of S&P 500 stocks outperforming the index in 2023, Broadcom has shown resilience with a staggering stock increase of over 680% over the past five years.
A brief overview of Broadcom’s growth trajectory reveals significant developments following its acquisition of the original Broadcom in 2016, a move that transformed the company from a chipmaker into a more diversified technology entity. This evolution is evidenced by a compound annual growth rate (CAGR) of 18.5% in revenue from fiscal 2016 to fiscal 2024, bolstered by key acquisitions such as Brocade, CA Technologies, Symantec’s enterprise security unit, and VMware.
The diversification into areas like infrastructure software has led to Broadcom generating 42% of its revenue from this sector, offering a buffer against cyclical downturns in the semiconductor market. With the growing demand for cloud services and cybersecurity solutions, Broadcom’s strategic position in the market continues to strengthen. Notably, sales of AI-oriented chips surged 220% to $12.2 billion in fiscal 2024, emphasizing the company’s integral role in the AI revolution.
Despite potential macroeconomic challenges such as tariffs and trade disputes affecting spending in the tech industry, analysts predict a robust revenue growth for Broadcom from fiscal 2024 to 2027, estimated at a CAGR of 17%, with a 21% increase in adjusted EBITDA. With a current enterprise value of $1 trillion and a reasonable valuation at 24 times this year’s adjusted EBITDA, Broadcom is poised for continued market outperformance as long as its AI segment expands.
For investors willing to look past potential market volatility and macro uncertainties, Broadcom presents a hopeful option for long-term growth, especially given its strategic advancements and strong foothold in thriving tech sectors.