Broadcom's Strong Q1 Performance Driven by AI Chip Demand and VMware Integration

Bulk of big Broadcom customers sign for VMware private cloud

Now working with seven hyperscalers for custom AI silicon. Not working on acquiring bits of Intel Broadcom's acquisition of VMware appears to be a big success, on the balance sheet at least, after the company announced a big majority of its top 10,000 customers have decided to acquire its Cloud Foundation stack and posted strong growth. The chips-and-code company today announced its results for the quarter ended February 2nd, its first for FY 2025. Revenue of $14.92 billion represented 25 percent year-on-year growth. Net income of $5.5 billion was a 315 percent increase on the result from Q1 2024. Broadcom no longer breaks out VMware revenue: sales of Virtzilla's wares are all now lumped into its infrastructure software business unit, which posted $6.7 billion revenue for Q1, up from $4.55 billion for the same quarter last year. Direct comparisons of those numbers are not wise as Broadcom owned VMware for four fifths of Q1 2024. Consider, instead, the $1.97 billion Q4 2023 and $7.6 billion FY 2023 software revenue that Broadcom recorded before it acquired VMware. Know, also, that Broadcom's software sales grew by just three percent in FY 2023 and four percent in FY 2022. That slow growth means the jump from $1.97 billion software revenue in Q4 2023 to $6.7 billion in Q1 2025 is likely due to VMware, which in its last quarter as an independent company reported $3.4 billion revenue. It therefore looks a lot like Broadcom has added around $1 billion to quarterly VMware revenue in a little over a year. How did it do that? As The Register has often explained, Broadcom stopped selling standalone VMware products and now only sells bundles of code and support under subscriptions that are more costly that Virtzilla's previous licenses. The biggest of those bundles is VMWare Cloud Foundation (VCF) and on Broadcom's earnings call CEO Hock Tan told investors "We are upselling customers to a full stack VCF ... and as of the end of Q1, approximately 70 percent of our largest 10,000 customers have adopted VCF." Bigger bills for existing VCF customers, and upselling others to VCF, probably explains the extra revenue. Some of the extra net income probably comes from cutting costs at VMware, which in its final standalone quarter reported operating margin of 16 percent. Broadcom's software business delivered 76 percent operating margin in Q1, an improvement on the 59 percent reported a year ago. The Register continues to hear of big migrations away from VMware, but on the numbers Broadcom's plans appear to have succeeded. The other eye-catching news in Broadcom's results came in the form of news that two additional (and un-named) hyperscalers have engaged the company to create custom AI accelerators. Broadcom already had three active customers for those "XPUs". Now it has four that Hock Tan described as "deeply engaged". Buyers of custom silicon tend not to reveal the specs of the stuff they buy, but Tan gave a hint by revealed Broadcom is taping out "the industry's first two nanometer AI XPU packaging as we drive towards a 10,000 teraflops XPU." He also mentioned work to deliver current hyperscale customers clusters that run 500,000 accelerators, then push to the million-accelerator clusters Broadcom's three existing hyperscale customers want to run by 2027. Tan mentioned accelerated R&D on Broadcom's Tomahawk Ethernet switches and said million-accelerator clusters will use Ethernet too. Semiconductor revenue hit $8.2 billion, an 11 percent year-on-year lift. $4.1 billion of it came from AI-related products, 77 percent year-on-year growth and $300 million ahead of forecasts thanks to "stronger shipments of networking solutions to hyperscalers on AI." On the same day as Broadcom's results announcement, the CEO also used his blog to suggest the US government should build more VMware-powered on-prem private clouds in line with what he described as the second Trump Administration's "two key objectives: reduce excessive federal government spending and advance the modernization of the federal government's IT infrastructure." Tan's post reveals that since acquiring VMware, Broadcom has consolidated 42 datacenters into seven facilities. Asked about the Trump administration's policy of introducing tariffs, Tan said it is too early to predict their impact. For what it is worth, Broadcom's share price is off by about 25 percent for the calendar year. One likely reason is the hit all AI-related stocks took after DeepSeek's debut led to a rethink of how much hardware will be needed to run AI workloads. Trump's tariffs may be another, as most Broadcom products are manufactured outside the USA. After-hours trading following Broadcom's earnings announcement saw its scrip jump from around $180 to settle at just over $200 apiece. That's still well below the price for most of January and February 2025, but above the price per share through calendar 2024. One more thing: Tan was asked if he's shopping for more companies. "No, I'm too busy," he replied. "We're too busy doing AI and VMware. We're not thinking of it at this point."

Broadcom Forecasts Strong Growth, Says AI Spending on Track

Broadcom Inc., a chip supplier for Apple Inc. and other big tech companies, gave an upbeat revenue forecast, reassuring investors that spending on artificial intelligence computing remains healthy. Sales will be about $14.9 billion in the three-month period ending May 4, Broadcom said in a statement Thursday. Analysts had estimated $14.6 billion on average, though some projections surpassed $15.1 billion.

Broadcom shares surge on strong revenue and AI outlook

Broadcom shares surged in after-hours trading on Thursday as the chip designer announced better than expected revenue and a confident outlook around artificial intelligence. The company, which designs custom AI chips and infrastructure for the biggest tech companies, offered a reassuring message to investors after tech stocks fell on Thursday during a broader pullback in the market. Broadcom reported first-quarter revenue of $14.9bn, and said it was expecting roughly the same revenue for the current quarter, beating Wall Street expectations. Profits in the period were $5.5bn, a fourfold increase from $1.3bn a year ago. For the current quarter the company said it expected $4.4bn in AI semiconductor revenue thanks to so-called 'hyperscalers' continuing to invest in their custom AI chips -- which can be used as an alternative to Nvidia's market-leading graphics processing units. US stocks fell on Thursday with the tech-heavy Nasdaq Composite down 2.6 per cent. Broadcom shares rose as much as 18 per cent in after-hours trading after suffering with the rest of the sector during the regular session. Shares of competitor Marvell Technology on Thursday plummeted almost 20 per cent after disappointing results on Wednesday. Analysts said it failed to meet the highest expectations for companies benefiting from billions of dollars in investments in custom chips by the likes of Amazon, Microsoft, Google and Meta. Nvidia shares are meanwhile down about 20 per cent since the start of the year. Semiconductors are facing uncertainty around the potential impact of new tariffs and export controls from Donald Trump's administration. Broadcom chief executive Hock Tan on Thursday said the advent of generative AI was "really accelerating the development of semiconductor technology", including specialist chips of the kind the company co-designs with customers, known as 'XPUs.' Broadcom's market capitalisation temporarily surged past $1tn in December as Tan forecast tens of billions of dollars in AI revenue into 2027, jumping 24 per cent in a single day. It has now fallen back to about $841bn. Daniel Newman, chief executive of research firm The Futurum Group, described Broadcom as a "sleeping giant" in AI, highlighting its diversification across software and semiconductors and its long-term bet on 'networking', the technology that connects chips inside a data centre. Broadcom does not name its chip clients, but analysts say it has worked with the likes of Google, Meta and TikTok parent ByteDance to make custom AI processors.

Broadcom forecasts strong second quarter on upbeat AI chip demand

March 6 (Reuters) - Broadcom (AVGO.O), opens new tab on Thursday forecast second-quarter revenue above Wall Street expectations on strong demand for its custom artificial intelligence chips from companies looking to process big data, sending its shares up more than 8% after the bell. The chipmaker expects revenue of around $14.90 billion, compared with estimates of $14.76 billion, according to data compiled by LSEG. Broadcom is seeing red hot demand for its custom artificial intelligence chips from companies looking for an alternative to the costly processors of market leader Nvidia (NVDA.O), opens new tab as they rapidly expand their AI infrastructure. Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers. Though Broadcom faces intense competition from Nvidia's (NVDA.O), opens new tab ethernet-like Infiniband products, it benefits from the expansion of AI data centers as one of the largest providers of advanced networking equipment. Analysts expect Broadcom to benefit further from large tech companies moving away from off-the-shelf chips to in-house processors as computing needs for AI tasks get more complex and personalized. Smaller rival Marvell Technology (MRVL.O), opens new tab had also reported strong growth for its AI segment, but did not meet investors' lofty expectations. Broadcom reported revenue of $14.92 billion for the first quarter, beating estimates of $14.61 billion. AI revenue for the first quarter surged more than 77% to $4.1 billion, driven by strong adoption of its custom-made accelerators. Revenue in its infrastructure software segment rose more than 47% to $6.70 billion, while analysts expected $6.49 billion. Reporting by Zaheer Kachwala in Bengaluru; Editing by Arun Koyyur Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Broadcom jumps as upbeat forecast quells AI chip demand worries

March 7 (Reuters) - Broadcom's shares soared 12% in premarket trading on Friday as the chipmaker's strong revenue forecast helped restore some confidence in AI chip demand after a bruising sector-wide selloff following rival Marvell Technology's bleak outlook. "Given the anxiety about AI conditions in general, these results should come as a relief," according to Morgan Stanley analysts. Broadcom (AVGO.O), opens new tab CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its artificial intelligence semiconductors as hyperscale customers invest in custom AI chips for data centers. Marvell's (MRVL.O), opens new tab shares closed down 19.8% on Thursday, marking their worst day in more than two decades, after an in-line revenue forecast. Big Tech's push to diversify beyond Nvidia's (NVDA.O), opens new tab pricey and supply-constrained AI processors has remained a tailwind for Broadcom. "Perhaps the AI trade isn't as dead as feared ... but amid AI nervousness, (Broadcom) management's view of the future is becoming even more positive," Bernstein analysts said. Reuters reported last month OpenAI was working with Broadcom to finalize its first custom chip design and reduce its reliance on Nvidia. Broadcom's shares more than doubled in 2024, but have declined about 23% so far this year. Peers Nvidia, Micron Technology (MU.O), opens new tab, Advanced Micro Devices (AMD.O), opens new tab and Marvell rose between 0.4% and 1.7% in premarket trading on Friday. Broadcom has a 12-month forward price-to-earnings ratio of 26.58, compared with 23.46 for Nvidia and 24.50 for Marvell, according to data compiled by LSEG. Reporting by Kanchana Chakravarty and Siddarth S in Bengaluru; Editing by Shounak Dasgupta Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Broadcom shares soar 9% as earnings top estimates on demand for custom AI chips

Broadcom reported first-quarter earnings on Thursday that topped analysts' expectations, and the chipmaker offered strong guidance for the current quarter. The stock rose 9% in extended trading. Here's how the company did versus LSEG consensus estimates: Broadcom said it expects about $14.9 billion in second-quarter revenue, higher than the $14.76 billion forecast by Wall Street analysts. Revenue in the last quarter rose 25% from $11.96 billion a year earlier. The company said net income increased to $5.5 billion, or $1.14 per share, from $1.33 billion, or 28 cents per share, in the same period last year. Broadcom's artificial intelligence business is at the center of the company's recent boom, which saw its stock price more than double last year. The company is one of the primary data center infrastructure vendors for AI, working both on Google's custom AI chips as well as providing essential components for networking thousands of other chips together to develop advanced AI software. Prior to the after-hours pop, the stock was down about 23% so far in 2025, as investors rotate out of risk partly due to concern about President Donald Trump's tariffs. Broadcom said it recorded $4.1 billion in AI revenue during the first quarter, which is 77% higher on a year-over-year basis. Those sales are reported as part of Broadcom's semiconductor solutions business, which grew 11% on an annual basis to $8.21 billion during the quarter. Broadcom CEO Hock Tan said in a statement that the company expects "continued strength in AI semiconductor revenue," reaching a projected $4.4 billion in the second quarter. In December, Broadcom said it was developing custom AI chips with three large cloud customers. The other major part of Broadcom's revenue comes from its infrastructure software division, which includes software from the company's acquisition of VMware in the fourth fiscal quarter of 2023. Broadcom said it saw $6.7 billion in software sales during the quarter, a 47% increase on an annual basis.

'Reassuring update from AI leader' -- What every major analyst is saying about Broadcom's blockbuster earnings

Broadcom 's blowout first-quarter earnings seem to have assuaged analysts' recent fears toward the battered AI trade. Rising market uncertainty and trade tensions have weighed down the semiconductor stocks as of late. AI poster child Nvidia is on pace to end the week 10% lower, and on Tuesday the tech-heavy Nasdaq Composite entered correction territory . These fears were stoked further on Thursday after chipmaker Marvell Technology issued revenue guidance that fell short of some elevated buyside expectations. But on Friday, Broadcom's blockbuster earnings report seemed to have righted the ship. The semiconductor manufacturer popped 6% after posting first-quarter adjusted earnings of $1.60 per share on revenue of $14.92 billion, exceeding consensus estimates for a profit of $1.49 per share and revenue of $14.61 billion from LSEG. Nvidia added 1% in sympathy, while the Nasdaq Composite was last trading 0.4% higher. Broadcom also guided for second-quarter revenue of $14.9 billion, which is higher than the $14.76 billion consensus forecast. In a statement, Broadcom CEO Hock Tan said that the company expects "continued strength in AI semiconductor revenue." Analysts at some of the biggest shops on Wall Street voiced their optimism after Broadcom's report. Here's what they had to say. Citi reiterates buy rating and price target of $220 per share Analyst Christopher Danely's price target is about 23% above Broadcom's Thursday closing price of $179.45. "Broadcom reported solid results and guided above Consensus driven by continued AI strength (27% of F25 sales) with two new AI engagements. Gross margins were above Consensus due to mix and we continue to believe strength from the AI semi business will offset any downside from sanctions on Bytedance and RF share loss at Apple." Deutsche Bank maintains buy rating and $240 per share price target Deutsche Bank's forecast corresponds to upside of around 34%. "Overall, despite AVGO being unlikely to completely avoid market-wide AI volatility, we believe the co's broadening customer exposure, and significant non-AI/Software businesses can continue to mute volatility through cyclical/secular growth," wrote analyst Ross Seymore. JPMorgan keeps buy rating, $250 per share price target JPMorgan's price target calls for 39% upside going forward. Analyst Harlan Sur said the stock "remains our top pick in semiconductors." "In the infrastructure software business, Broadcom continues to successfully convert and upsell to its VCF full stack solution. Overall, the team continues to drive a stable revenue growth profile even in a period of macro volatility given its portfolio breadth/ diversification/product cycles." Bank of America retains overweight rating, raises price target to $260 from $250 Analyst Vivek Arya's new target equates to 45% upside. The analyst said that Broadcom's recent report was a "reassuring update from AI leader." "We rate Broadcom Buy due to its high-quality diversified exposure to secular product cycles in the smartphone, cloud data center, telecom and enterprise storage markets. Additionally, with 45%+ EBITDA/FCF margins, Broadcom is among the most profitable semiconductor companies, which is likely to continue to drive strong cash returns." Barclays stands by overweight rating, $260 price target "Outside of a clean beat, GMs will tick down in the next few quarters as AI programs become a larger part of the portfolio, and R & D expense will tick up as management plans to invest heavily in the AI opportunity. In our view, AVGO is still one of the best positioned names in AI DC and we continue to see the ASIC business accelerating on a multi-year basis," wrote analyst Tom O'Malley. Morgan Stanley reiterates overweight rating, raises price target to $260 per share from $246 "The qtr should provide some relief after the MRVL disappointment," wrote analyst Joseph Moore. "Broadcom has one of the most compelling bull cases, and while there is significant optionality in their long-term outlook, their ambitious SAM is materially possible. We stay OW, and this remains our 2nd best AI play behind NVDA." UBS maintains buy rating and $270 per share price target Analyst Timothy Arcuri's target corresponds to a potential upside of 50%. "Amid expectations that were not quite as high as some peers, AVGO delivered solid results and guidance that should continue to bolster this investment thesis. Most importantly, the AI segment of the business continues to provide upside even as the custom ASIC business was a bit soft in FQ1 (Jan) around well telegraphed TPU transitions at Google." -- CNBC's Michael Bloom contributed to this report.

Broadcom shares rise as AI growth powers strong guidance

Hock Tan, CEO of Broadcom. Martin H. Simon | Bloomberg | Getty Images Broadcom shares climbed about 5% after the company posted strong first-quarter earnings and guidance that signaled ongoing artificial intelligence demand. The chipmaker posted adjusted earnings of $1.60 per share on $14.92 billion in revenue. That surpassed the adjusted earnings of $1.49 per share and $14.61 billion in revenue expected by analysts polled by LSEG. Revenues rose 25% from $11.96 billion a year ago. Bank of America analyst Vivek Arya called the results from Broadcom a "reassuring update from an AI leader" and a "positive read-across for AI sentiment." Broadcom has benefitted from the artificial intelligence boom that's swept Wall Street since the launch of ChatGPT, with shares more than doubling in 2024. The stock has pulled back about 19% since the start of 2025 as chipmakers reliant on parts outside the U.S. face tariff fears under President Donald Trump's administration. The results offered a reprieve for an industry that's faced a tough bar to clear this earnings season. Popular names have slumped post results even after topping estimates. Marvell Technology was the latest example, falling 20% Thursday for its steepest drop since 2001 after missing some elevated buyside estimates.

Powered by AI chip demand, Broadcom's stock bounces back on strong earnings, revenue and guidance - SiliconANGLE

Powered by AI chip demand, Broadcom's stock bounces back on strong earnings, revenue and guidance The computer chipmaker Broadcom Inc. posted better-than-expected financial results and offered a strong forecast for second quarter revenue, citing continued strong demand for its custom artificial intelligence chip. The strong results helped to ease concerns about beaten-down AI stocks, which surfaced yesterday after fellow chipmaker Marvell Technology Inc. only just delivered to expectations and fell sharply Thursday morning. Broadcom's stock surged more than 12% after-hours. The company reported first quarter earnings before certain costs such as stock compensation of $1.60 per share on revenue of $14.92 billion, up 25% from one year earlier. The numbers were better-than-expected, with Wall Street looking for earnings of just $1.51 per share on sales of $14.62 billion. Broadcom's net income rose to $5.5 billion, up from just $1.33 billion in the year-ago quarter. In addition, the company also offered strong guidance, saying it sees second-quarter revenue of $14.9 billion at the midpoint, surpassing the Street's target of $14.71 billion. Broadcom Chief Executive Hock Tan (pictured) hailed the company's "record first quarter revenue", saying this was primarily due to its hyperscale partners, who "continue to invest in AI accelerators and connectivity solutions for AI data centers." The company's semiconductor solutions segment delivered revenue of $8.2 billion, while the infrastructure software segment, which includes VMware's virtualization offerings, added $6.7 billion. On a conference call with analysts, Tan said the company's three biggest customers have been investing "aggressively" in powerful new AI models, and are racing to build one million-strong AI chip clusters by the end of 2027. Prior to the report, Broadcom's stock had fallen 6% during the regular trading session, while Marvell continued a downward spiral that began yesterday when its results failed to impress investors, falling 20%. The broader iShares Semiconductor exchange-traded fund was also down 4%. The companies both design their own AI chips, called application-specific integrated circuits. Broadcom also sells chips for a number of other use cases, including broadband, networking, server storage, industrial and wireless applications. Earlier this week, Reuters reported that Broadcom has been running manufacturing tests with Intel Corp.'s 18A manufacturing process to see if its chip fabs might be suitable for its needs. It's said that the company is mulling whether or not to place orders worth hundreds of millions of dollars with Intel's chip fab business. Any contracts would be a massive win for struggling Intel, whose contract manufacturing business has struggled to win over any prominent chop designer customers so far.

Broadcom momentum sparks renewed investor enthusiasm - SiliconANGLE

Since the generative artificial intelligence awakening, we've said consistently that Nvidia Corp. and Broadcom Inc. are the No. 1 and No. 2 AI plays in tech. Since peaking in mid-December of last year, Broadcom shares have been under pressure, down on sympathy with other semiconductor stocks and the general confusion about the economy, tariffs, inflation, jobs, geopolitics, debt and more. Broadcom's fiscal first-quarter results were impressive and support our base case for the company. They also calmed some investor concerns, at least for now. At one point the night after the earnings print, Broadcom's stock was up 15% from its previous close, and finished up nearly 9% on Friday, despite a down day in tech. Market transitions such as the one we're in now often bring confusion and market volatility as the new high-growth sectors are not big enough to offset the slowdown in the larger declining markets. Nvidia doesn't have this problem because it is at the mainspring of the new wave. Broadcom is facing a similar but different situation in that its traditional businesses are ones that are extremely durable. Moreover, we see two relatively new dynamics coming into play for Broadcom: 1) Multiple high-volume hyperscalers are coming to Broadcom to enable their custom AI accelerators; and 2) Broadcom's VMware strategy is working, lifting the company to new software heights. In this Breaking Analysis, we pivot off of Broadcom's Q1 earnings to revisit our thesis on the company. That premise has centered on the idea that connectivity both within the XPU complex and across distributed clusters remains a massive opportunity for Broadcom, combined with a radically new strategy for VMware that is delivering results much in the way as we projected. We initiated our Broadcom coverage in earnest on Breaking Analysis about three years ago, triggered by the VMware acquisition. Several of our research notes are shown below, tracking the company's semiconductor and expanding software business. Let's start by looking at how Broadcom applied its ethos to VMware. Broadcom's acquisition strategy for VMware -- initiated several years ago -- has been executed in almost exact alignment with leadership's publicly stated plans. Initially, industry observers were skeptical about Broadcom's ability to "tame the VMware beast," given VMware's historically broad portfolio and aspirational visions. The subsequent narrowing of VMware's focus, increased attention to core products, and elevated pricing strategy all confirm that Broadcom is following a well-defined operational model. Specifically, we expected Broadcom to focus research and development to prioritize core value areas, shed non-performing assets and push customers toward bundled subscription offerings. Though this tactic has created frustration among longtime VMware users accustomed to perpetual licensing structures, it has also driven measurable gains in revenue and profitability. This shift forces customers onto higher-value contract models, which in turn boosts average deal sizes. Notably, many critics attribute the changes to "price hikes," although Broadcom characterizes them as "increased value." There is legitimate merit to Broadcom's assertions, despite the forced move to bundling. We documented this on theCUBE with Broadcom's Drew Nielsen last summer at VMware Explore. We found the economic analysis to be fair and defensible, with the fundamental and controversial assumption that customers go "all in" on the VCF bundle. In our opinion, one of Broadcom CEO Hock Tan's defining traits is a high "do:say" ratio. By closely examining past statements, we find that Broadcom's strategic moves consistently align with Tan's predictions. Our research suggests that customers -- though often uncomfortable with the forced transition to subscription and bundled packages -- benefit from a company that reliably executes on its roadmap. This level of predictability resonates with financial stakeholders, despite short-term challenges in the customer and partner ecosystems. Broadcom's operational philosophy was highlighted last year at MWC, better known as Mobile World Congress, during discussions with the company's semiconductor chief, Charlie Kawwas. The consistent message emphasized Broadcom's ability to drive durable business outcomes and navigate new frontiers such as AI, all while applying the same methodical, profit-oriented approach. We believe these insights reinforce a unified corporate ethos -- one that systematically applies proven processes to each new acquisition and market challenge. Though critics may continue to voice concerns about Broadcom's vision for VMware's combined offerings and licensing approaches, our research indicates that Broadcom's results and track record of fulfilling stated goals cannot be dismissed. Customers that have long enjoyed perpetual licenses are being pushed toward subscriptions, often experiencing sticker shock in the process. Nonetheless, our data suggests that many of these organizations are willing to absorb the transition if they see tangible returns and ongoing product innovation. In our view, this dynamic underscores the importance of aligning cost structures with demonstrated value. Despite market chatter about negative customer experiences, Broadcom's consistent execution has validated its strategic plan and strengthened its reputation on Wall Street. We believe the transition to a subscription-based model -- though abrupt for some -- reinforces Broadcom's broader ambition of extracting higher margins and focusing on profitable, core technology areas. Our research indicates that VMware's licensing and pricing changes -- initiated under Broadcom's stewardship -- have triggered noticeable market backlash, which is reflected in the Enterprise Technology Research data. This data illustrates customer sentiments and spending intentions across several hundred VMware accounts, spanning various product lines. In our view, the most striking evidence of this negative reaction lies in the shift in Net Score -- a metric similar to a Net Promoter Score except Net Score applies to spending intentions. Below we show the ETR methodology applied to VMware. Net Score tracks the percent of more than 700 VMware customers in the ETR survey within the following categories as shown above: Collectively, we see Net Score, which subtracts the red from the green and is reflected in the blue line, dipping from the mid-20s into negative territory, suggesting that VMware is experiencing real pressure in the market. The pervasion metric -- VMware's percentage of overall customers in the ETR survey -- also declined, reinforcing the narrative that some organizations are walking away from or reducing their VMware footprints. One would look at these results and come to the conclusion that VMWare is in real trouble. But that conclusion is not correct. On the chart above the vertical axis is Net Score or spending momentum, what we just explained in the previous chart, and you can see the dot plots for VMware over time. VMware's Net Score went from around 20% down to the negative territory. It kept steadily tumbling since January of 2023. We've plotted Nutanix, Ubuntu, and Red Hat, picking three target platforms that potentially people would migrate to. We left Microsoft out because it always skews the data. One would look at this data and think it's really bad news for VMware, but the reality is that this doesn't reflect revenue -- it's an account-based metrics. In our opinion, these trends reflect a combination of higher costs, forced migrations to subscription bundles, and significant shifts in VMware's operating model post-acquisition. VMware's large installed base suggests that Broadcom is comfortable with the negative impact of abrupt pricing changes, reduced flexibility and low margin customer defections. The evidence shows that many customers continue to invest in VMware solutions, suggesting that the company retains a measure of loyalty, albeit forced, and a core foundation on which it can rebuild. Going forward, we believe it will be critical for VMware to strike a balance between monetization and customer satisfaction. This means a continued investment in core functionality and innovation, including supporting AI workloads with what VMware terms "Private AI" -- that is, on-premises workloads. In our view, the driving rationale behind Broadcom's evolving business model is shown below and describes the pressures facing traditional hardware infrastructure -- specifically server, storage and networking. These segments are increasingly squeezed by advances in silicon, cloud economics and software, which continue to take value from the middle of the stack. As a result, Broadcom has systematically repositioned itself, participating more aggressively in two key value-creation areas: Last year at MWC 2024, Kawwas underscored the crucial role of networking in AI workloads. When scaling beyond single XPUs, interconnecting massive clusters becomes paramount. According to Kawwas, the inability to scale up to thousands of XPUs effectively -- without the right networking strategy -- diminishes performance and efficiency. In our view, Broadcom's approach highlights its capacity to integrate hardware and software solutions that address the full scope of AI's demands. [Kawwas explains the changes to connectivity required by AI workloads.] When you talk AI, everything has changed because with AI, you have these elephant workloads that cannot run on a single processor, whether it's a GPU, TPU, NPU, the flavor of the day, let's call them for the next 15 minutes XPUs. If you take these XPUs, and you take some of these elephant workloads, you can't run them on a single XPU. You can't even run them on eight CPUs or XPUs or GPUs, you have to now scale into the thousands today, thousands of these. In order to do that, you've transcended now a single system where you've scaled up. Now you have to scale out to many, many of these systems and racks, and you have to interconnect them. And guess what? If you don't have the right network strategy and connectivity strategy, this will not work, this will not scale up. - Charlie Kawwas, Broadcom The conversation around AI also surfaces a notable duopoly in the networking space with only two company's truly able to excel at connectivity within the chip and across large-scale clusters: We believe competition will intensify as AI expands beyond traditional data center workflows, but the massive market for flexible, high-performance network fabrics is booming. Though each player differentiates via proprietary versus more open approaches, the rapidly growing size of the AI market suggests headroom for both to thrive. Overall, we believe Broadcom's strategy of balancing semiconductor innovation with infrastructure software is well-positioned to address the next wave of high-performance, AI-driven workloads. The one area we've felt was lacking for VMware has been its lack of a clear data strategy. It appears VMware generally will leave the data piece to its customers and others in the ecosystem to sort out. In reviewing Broadcom's performance from May 2022 to March 2025, the numbers paint a vivid picture of how the VMware acquisition has fundamentally altered the company's profile. The most striking theme is the accelerating shift toward software: Our analysis indicates that, while some legacy VMware customers are exiting due to price hikes or dissatisfaction with forced subscriptions, Broadcom remains focused on high-value customers willing to adopt its full VMware Cloud Foundation (VCF) stack. According to Broadcom, approximately 70% of its top 10,000 customers have migrated to VCF, driving improvements in gross and operating margins. Those customers no longer aligned with Broadcom's direction are effectively being pruned from the portfolio. Beyond VMware, Broadcom continues to leverage the surge in AI-driven workloads: One of the few negatives in Broadcom's financial picture is free cash flow as a percentage of revenue, down from over 50% to around 40%. Management attributes the decline to several factors: Despite these headwinds, investors appear willing to tolerate near-term pressures in light of Broadcom's operating discipline and rapid revenue expansion. Critics often liken Broadcom to a private equity firm, arguing it narrows R&D investment and focuses on near-term extraction. However, from our perspective, Broadcom employs a deliberate approach to concentrate R&D on core technologies (for example, Tomahawk switches, SerDes, custom silicon for hyperscalers). While it curtails broad experimentation, it invests heavily in targeted areas with strong returns -- contributing to robust margins and a notable market valuation surge. Looking ahead, Broadcom's strong orientation toward software, AI and custom silicon positions it to regain the trillion-dollar market-cap mark if current momentum continues. The TAM expansion signaled by Tan ($60 billion to $90 billion excluding the four new design wins), coming from hyperscaler demand for XPUs and AI infrastructure, further bolsters the bullish case. The chart above, developed by David Floyer, depicts total data center spending worldwide -- including servers, storage, networking, power and cooling, and also hyperscale infrastructure. After years of relative flatness and even contraction in 2020, the market has entered a super cycle fueled by "extreme parallel processing" or EPP, or what Nvidia CEO Jensen Huang often calls accelerated computing. Overall, the data center market is entering an era where parallel processing becomes the default architecture for emerging workloads, driving unprecedented growth and reshaping vendor strategies. From an investor perspective, companies enabling EPP -- particularly in the areas of specialized compute, high-speed networking and AI acceleration -- stand to capture significant new value as the market rockets toward a trillion dollars and beyond. Broadcom and Nvidia in our view are two of the most well-positioned "picks and shovel" companies that will benefit from the growth of this market. Broadcom now counts three primary hyperscalers (Meta, Google, ByteDance) plus two additional disclosed, plus two more unnamed design wins. In our view, these design wins anchor Broadcom's strategy of mixing custom and merchant silicon, complemented by a robust software business. Broadcom's durable approach -- projects lasting 10 years or more -- mirrors its history of building deep moats and reliable profit engines. The company highlights a $60 billion to $90 billion SAM by 2027 for its AI-related offerings, excluding the potential upside from the newly added "+2" hyperscalers. According to company statements, Broadcom's AI business currently operates at a $16 billion run rate, growing at 40% to 50% (with a notable 77% spike in the latest quarter). These figures underscore a trajectory that could elevate Broadcom to a scale comparable to other top AI enablers such as Nvidia. Despite Broadcom's positive momentum, regulatory questions loom. Hock Tan has been queried on how AI export restrictions and technology diffusion rules might impede sales to Chinese hyperscalers (for example, ByteDance and Alibaba). Though Broadcom can partially tailor its silicon to comply with controls (for example, down-tuning certain features), it ultimately cannot dictate geopolitical policy. The company's ability to navigate these evolving restrictions will be crucial for sustaining future growth. Broadcom stands out as a durable, highly profitable enterprise, enjoying both near-term gains in AI networking and longer-term expansions of its custom silicon customer base. Though there are real risks -- especially around export controls and an uncertain geopolitical environment -- the company's diversified approach, deep moats and robust margin profile suggest a compelling story for investors. Whether one is bullish, bearish or neutral likely depends on risk tolerance for regulatory issues and belief in Broadcom's capacity to execute on its design wins. What do you think? Is Broadcom's software strategy forcing you to rethink your on-prem infrastructure partners? Or are you staying the course and sticking with VMware, defecting or taking a hybrid approach?

Broadcom's AI revenue jumps 77%: Stock rebounds 14%

Broadcom CEO Hock Tan provided a positive second-quarter forecast on Thursday, alleviating investor concerns over AI chip demand amid a competitive landscape. Following a 6% decline in shares, Broadcom's stock surged 14% in extended trading after the announcement. The chipmaker anticipates revenue of approximately $14.90 billion, exceeding analyst estimates of $14.76 billion, according to LSEG data. Broadcom is experiencing substantial demand for its custom artificial intelligence chips as cloud computing companies seek alternatives to expensive Nvidia processors to expand their AI infrastructure. Tan stated that revenue for AI semiconductors is projected at $4.4 billion in the second quarter, driven by hyperscale customers investing in custom AI chips for their data centers. Analysts expect Broadcom to benefit further as large tech firms shift from off-the-shelf chips to in-house processors due to the increasing complexity of AI task requirements. Broadcom and TSMC explore Intel acquisition options Broadcom has engaged with four new hyperscale customers for the development of custom chips, in addition to the existing three customers already utilizing its processors. These new clients have not been factored into the projected revenue opportunity of $60 billion to $90 billion by 2027, as revealed by Tan during the post-earnings call. OpenAI is finalizing its first custom chip design with Broadcom to decrease its reliance on Nvidia, as reported by Reuters. "The company is enabling hyperscalers and others who want to build custom AI accelerators to control their designs and costs," said Anshel Sag, an analyst at Moor Insights & Strategy. Broadcom is also assessing Intel's advanced manufacturing process, known as 18A, having tested portions of chips. Summit Insights analyst Kinngai Chan noted that Broadcom's position in the AI market is more diversified with multiple AI ASIC customers, providing a competitive edge. In the first quarter, Broadcom reported revenue of $14.92 billion, surpassing estimates of $14.61 billion. AI revenue rose over 77% to $4.1 billion due to strong demand for its custom-made accelerators. The infrastructure software segment's revenue increased more than 47% to $6.70 billion, exceeding expectations of $6.49 billion. Adjusted earnings per share rose 45% to $1.60, exceeding the expected $1.49. Adjusted EBITDA grew 41% year-over-year to $10.08 billion, surpassing the FactSet consensus estimate of $9.66 billion. After-hours trading saw Broadcom shares increase by more than 12%, erasing previous losses and pushing the stock back above $200. Despite earlier struggles following competition from the Chinese startup DeepSeek's AI model, Broadcom shares had reached a record high of $250 on December 16. The news of engaging with two new hyperscaler clients to develop custom accelerators was a key highlight in the earnings call that pushed shares higher. Current customers include known entities such as Alphabet, Meta Platforms, and TikTok's parent company ByteDance. The announcement of new customer engagements is expected to mitigate concerns around AI spending and indicates a preference for custom silicon over standard graphics processing units from rivals like Nvidia. Broadcom's estimated serviceable addressable market (SAM) for AI is projected to be between $60 billion and $90 billion by fiscal 2027. Tan has indicated that this estimate may be conservative. For its fiscal 2025 second quarter, Broadcom expects revenue to rise 19% year-over-year to $14.9 billion, surpassing analysts' consensus estimate of $14.7 billion. AI revenue is projected to increase to $4.4 billion. The legacy semiconductor business is anticipated to show modest revenue growth, while software revenue is expected to grow 23% year-over-year to $6.5 billion. Management forecasts adjusted EBITDA to be approximately 66% of projected revenue, equating to $9.83 billion, which exceeds the FactSet consensus of $9.5 billion. Broadcom has increased its research and development investments to develop the next generation of accelerators and expand its Tomahawk 5 high-bandwidth network switches. "These R&D investments are very aligned with the roadmap of our three hyperscale customers as they each raise towards 1 million XPU clusters by the end of 2027," Tan explained.

Broadcom Stock Surges on Strong Earnings, Outlook

Broadcom (AVGO) reported fiscal first-quarter results that topped analysts' expectations, sending shares higher in extended trading Thursday. The chipmaker's revenue grew 25% year-over-year to $14.92 billion, above the analyst consensus from Visible Alpha. Adjusted net income came in at $7.82 billion, up from $5.25 billion a year earlier and ahead of expectations. The gains came as Broadcom's AI revenue surged 77% to $4.1 billion. CEO Hock Tan said the company expects "continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers." Broadcom projected total second-quarter revenue of $14.9 billion, slightly above the analyst consensus of $14.82 billion. The results also come after a report earlier this week that Broadcom has been running tests of Intel's (INTC) chipbuilding process for possible manufacturing contracts. Broadcom has reportedly considered buying Intel's chip design arm. Shares of Broadcom jumped 9% in extended trading Thursday following the release. Despite a tough start to 2025, they've gained over 27% in the past 12 months through the closing bell.

Broadcom Stock Jumps as Results, Outlook Show Robust AI Chip Demand

Broadcom reported adjusted earnings per share (EPS) of $1.60 on revenue that grew 25% year-over-year to $14.92 billion, both above Visible Alpha expectations. Its current-quarter projected revenue of $14.9 billion came in slightly ahead of the consensus. The company said its AI revenue jumped 77% in the quarter, with projections showing continued improvement in that area. Citigroup stuck with its buy rating on the stock "given upside from AI" and $220 price target, noting that the chipmaker's AI strength would offset any potential "downside" from sanctions on TikTok parent ByteDance and any loss of the business of supplying radio-frequency (RF) chips to Apple (AAPL) . Both China's Bytedance and the Apple RF chip business are projected at around 2% of Broadcom's fiscal 2025 sales, Citi said. U.S. President Donald Trump has an April 5 deadline for TikTok to be sold or banned, although The Hill cited him as saying Thursday that it could be extended if a deal isn't reached. Apple's iPhone sales, meanwhile, have been slowing, threatening the RF chip business. Broadcom shares are up about 33% in the past 12 months through Thursday, although they struggled at the start of the year given mounting concerns over tech giants' big AI spending and uncertainty about the potential impact of the Trump administration's policies on tariffs and AI chip export curbs.

Broadcom shares surge as solid forecast eases demand worries for AI chips

Broadcom is seeing red-hot demand for its custom artificial intelligence chips from cloud computing companies looking for an alternative to the costly processors designed by Nvidia as they expand their AI infrastructure. Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers.Broadcom CEO on Thursday assuaged investor worries about AI chip demand with a strong second-quarter forecast and hinted about new potential customers that could boost revenue in a highly competitive market. Its forecast eased concerns about the thirst for AI chips, a day after Marvell Technology's spooked the market with a tepid forecast. Broadcom shares, which closed down 6%, surged 14% in extended trading after the results. The chipmaker expects revenue of around $14.90 billion, compared with estimates of $14.76 billion, according to data compiled by LSEG. Broadcom is seeing red-hot demand for its custom artificial intelligence chips from cloud computing companies looking for an alternative to the costly processors designed by Nvidia as they expand their AI infrastructure. Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers. Analysts expect Broadcom to benefit further from large tech companies moving away from off-the-shelf chips to in-house processors as computing needs for AI tasks get more complex and personalized. Broadcom now has four more hyperscale customers who are "deeply engaged" with it to create their own custom chips separate from the current three that use its processors, CEO Tan said in a post-earnings call. These four are not included in its estimate of revenue opportunity of $60 billion to $90 billion in 2027, he said. Reuters reported last month OpenAI is working with Broadcom to finalize its first custom chip design and reduce its reliance on Nvidia. "The company is enabling hyperscalers and others who want to build custom AI accelerators to control their designs and costs," said Anshel Sag, an analyst at Moor Insights & Strategy. Broadcom is one of several companies that is evaluating Intel's most advanced manufacturing process, known as 18A. It has run test wafers through the Intel factories that evaluate portions of chips, not complete designs. "Broadcom is much better positioned compared to its peers as its exposure in AI market is relatively more diversified with multiple AI ASIC customers," Summit Insights analyst Kinngai Chan said. Application-Specific Integrated Circuit, or ASICs, are chips designed for specific tasks. Designing and manufacturing an ASIC helps companies save the amount of energy chip use and boost performance. Broadcom reported first-quarter revenue of $14.92 billion, beating estimates of $14.61 billion. AI revenue surged more than 77% to $4.1 billion on strong adoption of its custom-made accelerators. Revenue in its infrastructure software segment rose more than 47% to $6.70 billion, while analysts expected $6.49 billion.

Broadcom Stock Surges On Q1 Earnings Beat, Revenue Beat, Strong Guidance: 'We Expect Continued Strength In AI Semiconductor Revenue' - Broadcom (NASDAQ:AVGO)

Broadcom Inc AVGO reported first-quarter financial results after the market close on Thursday. Here's a look at the key metrics from the quarter. Q1 Earnings: Broadcom reported first-quarter revenue of $14.92 billion, beating analyst estimates of $14.61 billion, according to Benzinga Pro. The semiconductor company reported first-quarter adjusted earnings of $1.60 per share, beating analyst estimates of $1.49 per share. Total revenue was up 25% on a year-over-year basis, driven by strength in AI semiconductor solutions and infrastructure software. Broadcom generated $6.11 billion in cash from operations and $6.01 billion in free cash flow during the quarter. The company ended the quarter with approximately $9.31 billion in cash and cash equivalents. "Q1 AI revenue grew 77% year-over-year to $4.1 billion and infrastructure software revenue grew 47% year-over-year to $6.7 billion," said Hock Tan, president and CEO of Broadcom. "We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers." Broadcom's board approved a quarterly cash dividend of 59 cents per share, payable on March 31 to shareholders of record as of March 20. See Also: Trump Delays Mexico Tariffs For A Month, Economic Uncertainty Persists Outlook: Broadcom expects second-quarter revenue of approximately $14.9 billion, versus estimates of $14.76 billion. The company anticipates first-quarter adjusted EBITDA of approximately 66% of projected revenue. Broadcom executives will further discuss the quarter on a conference call with investors and analysts at 5 p.m. ET. AVGO Price Action: Broadcom shares were up 8.73% after hours, trading at $195.11 at the time of publication Thursday, according to Benzinga Pro. Photo: Shutterstock. AVGOBroadcom Inc$194.551.55%OverviewMarket News and Data brought to you by Benzinga APIs

Broadcom Shares Jump 13% In After-Hours Trading On Strong AI Results -- Gary Black Says, 'This Should Help AI Stocks Tomorrow - Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD)

Broadcom Inc. AVGO shares jumped 12.82% in after-hours trading Thursday after reporting better-than-expected first-quarter results, recovering from a 6.33% drop during regular trading hours amid a broader artificial intelligence chip selloff. What Happened: The semiconductor giant posted first-quarter revenue of $14.92 billion, surpassing analyst estimates of $14.61 billion, along with adjusted earnings of $1.60 per share, exceeding the expected $1.49 per share, according to Benzinga Pro data. The Future Fund LLC Managing Partner Gary Black highlighted Broadcom's strong performance stating, "This should help AI stocks tomorrow." CNBC's Jim Cramer shared a similar sentiment, writing, "Whoever is walking down Broadcom right now I think is making a mistake." The company expects continued AI momentum, projecting second-quarter AI semiconductor revenue of $4.4 billion as "hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers." Overall second-quarter revenue guidance stands at approximately $14.9 billion, above analyst estimates of $14.76 billion. See Also: Jeff Bezos Brings Amazon's Hard-Charging Culture, 50-Hour Workweek To Blue Origin: CEO Says Growth Led To 'More Bureaucracy...Less Focus' Why It Matters: The selloff in AI chip stocks on Thursday included Nvidia Corp. NVDA, Advanced Micro Devices, Inc. AMD, and Taiwan Semiconductor Manufacturing Co. TSM, which fell in sympathy with Marvell Technology Inc.'s MRVL weaker guidance. Broadcom has a consensus price target of $537.08 based on 26 analyst ratings, with recent targets from Morgan Stanley, Barclays, and Mizuho averaging $255.33. Read Next: Mark Cuban Was Asked How He'd Invest $100K -- His Answer? Buy Bulk Toothpaste And Soup For The 'Best Guaranteed Return On Investment' Image Via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMDAdvanced Micro Devices Inc$98.91-2.71%OverviewAVGOBroadcom Inc$202.455.67%MRVLMarvell Technology Inc$72.80-19.2%NVDANVIDIA Corp$111.50-4.94%TSMTaiwan Semiconductor Manufacturing Co Ltd$177.74-3.55%Market News and Data brought to you by Benzinga APIs

Broadcom Stock Surges Nearly 13% In Friday Pre-Market: What's Going On? - Broadcom (NASDAQ:AVGO), Intel (NASDAQ:INTC)

Shares of Broadcom Inc. AVGO climbed 12.7% during the pre-market trading session on Friday following the company's first quarter earnings and revenue beat. What Happened: Broadcom, a leading semiconductor company, reported first quarter revenue of $14.92 billion, surpassing the forecasted $14.61 billion on Thursday. The company's adjusted earnings stood at $1.60 per share, exceeding the anticipated $1.49 per share. The company's total revenue saw a 25% year-over-year increase, led by a robust performance in AI semiconductor solutions and infrastructure software. Broadcom reported $6.11 billion in cash flow from operations and $6.01 billion in free cash flow for the quarter, concluding with approximately $9.31 billion in cash and cash equivalents. First quarter AI revenue for the company grew 77% year-over-year to $4.1 billion and infrastructure software revenue grew 47% year-over-year to $6.7 billion. SEE ALSO: Marvell Surpasses AI Chip Sales Target, Aims Higher For 2026, But Stock Plunges Due To Muted Guidance Why It Matters: These results come amid speculation around a potential merger and acquisition with Intel Corp. INTC. However, CEO Hock Tan dismissed these rumors during the company's first-quarter earnings call. This week, reports indicated that Nvidia (NVDA) and Broadcom are running manufacturing tests with Intel's 18A process The company expects continued growth in AI semiconductor revenue of $4.4 billion in the second quarter, led by ongoing investment in AI XPUs and custom solutions for AI data centers by hyperscale partners. Meanwhile, Broadcom's board has also authorized a quarterly cash dividend of 59 cents per share, which will be paid on March 31 to shareholders recorded as of March 20. Kinngai Chan, analyst at Summit Insights stated, "Broadcom is much better positioned compared to its peers as its exposure in AI market is relatively more diversified with multiple AI ASIC customers," reported Reuters. Meanwhile, The Future Fund LLC Managing Partner Gary Black highlighted Broadcom's strong performance, stating that it should help AI stocks the next day. Broadcom's stock dropped 6.33% to close at $179.45 on Thursday. However, it recovered in after-hours trading, surging by 12.82%. So far this year, the stock has dropped 22.64%, as per Benzinga Pro data. Read More: Gary Black Says Walgreens Is A Company That 'Shouldn't Be Public,' Cites Largest Shareholder's Role In $10 Billion Sycamore Deal Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AVGOBroadcom Inc$202.3812.8%Stock Score Locked: Edge Members Only Benzinga Rankings give you vital metrics on any stock - anytime. Unlock RankingsEdge RankingsMomentum89.60Growth85.61Quality91.33Value8.69Price TrendShortMediumLongOverviewINTCIntel Corp$20.50-1.20%NVDANVIDIA Corp$112.071.36%Market News and Data brought to you by Benzinga APIs

Broadcom 'Well Positioned' As Analysts Predict Continued AI Revenue Growth - Broadcom (NASDAQ:AVGO)

Broadcom Inc AVGO analysts highlighted the company's AI growth and recovery of non-AI segments after the company's quarterly financial results beat expectations on Thursday. The Broadcom Analysts: Cantor Fitzgerald analyst CJ Muse maintained an Overweight rating on Broadcom with a $300 price target. JPMorgan analyst Harlan Sur reiterated an Overweight rating with a $250 price target. KeyBanc analyst John Vinh maintained an Overweight rating and raised the price target from $260 to $275. Benchmark analyst Cody Acree reiterated a Buy rating with a $255 price target. Read Also: Broadcom Shares Jump 13% In After-Hours Trading On Strong AI Results -- Gary Black Says, 'This Should Help AI Stocks Tomorrow Cantor Fitzgerald on AVGO: Broadcom reported a strong beat and raise, Muse said in a new investor note. The analyst said Broadcom announced four new XPU customers, who he believes are ARM, OpenAI, Apple and a fourth that could be Oracle, Microsoft, Amazon, or xAI. "That will only add to the company's AI revenue outlook and should dramatically increase the company's SAM of $60-$90B into FY27," Muse said. The analyst said Broadcom's non-AI businesses are showing a recovery. "Add it all up, and this was a solid report and well above investor expectations." JPMorgan on AVGO: Broadcom expanded its design win with the two newly announced AI ASIC engagements, Sur said in a new investor note. The analyst said the quarterly results were solid and revenue was "better than expected." "This strength is driven by continued strong AI networking demand and the early ramp of Google's TPU v6 3nm ASIC training chip," Sur said. "We believe AI revenues will continue to grow throughout the year." Sur said the company's design pipeline for AI ASIC is key for future growth. Seven customers are ahead of Sur's expectation for six total customers. "We see Broadcom as a leader in wireless, data center networking, AI/deep learning ASICs, storage, and infrastructure silicon, hardware, software with broad-based exposure to positive trends in these end markets." Sur said Broadcom has "unmatched scale" and capabilities in the industry. KeyBanc on AVGO: Broadcom's results and guidance exceeded expectations, Vinh said in a new investor note. The additional AI customers could add to the company's revenue, the analyst said. "We're encouraged by these strong results," Vinh said. Benchmark on AVGO: New AI engagements helps with long-term visibility on Broadcom's upside, Acree said in a new investor note. "The company delivered 10% sequential and 77% annual growth in its AI revenue," Acree said. The analyst said much of Broadcom's AI strength is from the networking business. "With expected continued growth in its AI business, we believe Broadcom is extremely well positioned to capitalize on what we expect to be improving industry fundamentals over the immediate term." AVGO Price Action: Broadcom stock is up 4.6% to $187.75 on Friday versus a 52-week trading range of $119.76 to $251.88. Broadcom stock is down 19% year-to-date in 2025 and up over 33% in the last year. Read Next: Broadcom CEO Hock Tan Brushes Off Intel Acquisition Speculation: 'M&A, No, I'm Too Busy...' Photo: Shutterstock AVGOBroadcom Inc$188.104.82%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum89.60Growth85.61Quality91.33Value8.69Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs

Broadcom's CEO On $4B AI Sales, Tariffs, VMware And 'Stepping Up' Cloud R&D

Here are the biggest remarks from CEO Hock Tan during Broadcom's quarterly earnings report around total AI sales, VMware customers, enabling AI for hyperscale cloud providers and potential impact of tariffs. Broadcom reported a record $14.9 billion in sales during its first quarter 2025 as CEO Hock Tan highlighted his company's booming AI sales, hyperscale cloud customers, the potential impact of tariffs and new VMware customer statistics. "We beat our guidance for AI revenue of $3.8 billion due to stronger shipments of networking solutions to hyperscalers on AI," said CEO Hock Tan during Broadcom's Q1 2025 financial earnings call on Thursday. "Our hyperscaler partners continue to invest aggressively in their next-generation frontier models, which do require high-performance accelerators, as well as AI data centers with larger clusters," he said. "And consistent with this, we are stepping up our R&D investment on two fronts." The Palo Alto, Calif.-based tech giant now has an annual run rate of nearly $60 billion. [Related: Accenture Exec: Why $2.5B Google Cloud-Salesforce AI Alliance Is 'Beautiful'] In terms of VMware and VMware Cloud Foundation (VCF), Broadcom is focused on "upselling customers to a full-stack VCF," which enables the entire data center to be virtualized to enable customers to create their own private cloud environment on-prem. "As of the end of Q1, approximately 70 percent of our largest 10,000 customers have adopted VCF," he said. CRN breaks down the five biggest highlights and boldest remarks from Hock Tan on the chipmaker and software company's Q1 2025 results and future. Broadcom's Q1 Earnings Results Before jumping into Tan's biggest statements, let's take a quick look at the Broadcom's financial results for first quarter 2025, which ended Feb. 2, as the tech giant continues to drive AI on a global basis. Broadcom generated $14.9 billion during the first quarter, which bested Wall Street's expectations of $14.62 in total sales. The $14.9 billion in revenue represents a 25 percent year-over-year increase compared to approximately $12 billion during Q1 2024. Broadcom's net income increased a whopping 315 percent to $5.5 billion in Q1 2025 compared to $1.3 billion year over year. Here is what Hock Tan said regarding its AI revenue, VMware momentum, potential tariff impact on business and enabling hyperscale cloud providers with Broadcom's innovation.

A Tale of 2 AI Stocks: Why Broadcom Soared Even as "Baby Broadcom" Plunged Last Week | The Motley Fool

Artificial intelligence stocks have taken a beating over the past month. While AI-fueled enthusiasm caused several stocks to boom in 2024, investors now appear to be experiencing angst over valuations in the face of potential tariffs, trade restrictions to China, or a digestion period in AI spend. Two 2024 winners were Broadcom (AVGO -5.39%) and Marvell (MRVL -7.30%). Their portfolios are somewhat similar, so much so that Marvell is sometimes called "baby Broadcom." However, when each stock reported last week, Marvell plunged, while Broadcom soared. It was an interesting dichotomy and may have reflected a few changing dynamics in the AI races. While there are differences between the two, both Marvell's and Broadcom's portfolios are weighed toward infrastructure chips for networking and communications, along with custom ASIC IP that cloud hyperscalers use in their custom AI accelerators, called XPUs. All eyes in recent years have been on custom ASICs, which have seen hypergrowth as the AI buildout has accelerated. Marvell CEO Matt Murphy noted that two years ago, Marvell projected about $200 million in ASIC revenue in calendar 2023 and $400 million in 2024. But Marvell wound up exceeding $1.5 billion in 2024, with management projecting more than $2.5 billion in 2025! However, the topic of ASICs is also where things got dicey for Marvell during its conference call. You see, Marvell's ASIC revenue is highly concentrated in a single customer: Amazon (AMZN -2.36%) Marvell also also works with Alphabet on Alphabet's new Arm-based CPU, but not its AI accelerator, as we'll see. Although Murphy noted that it has great visibility into ASIC revenue this year and next , one analyst asked about rumors of potential competition for the business of its all-important customer. Murphy answered: [T]o be crystal clear, we do expect revenue from these custom XPUs with this customer, not only to grow in fiscal '26, which is the year we're in, but to grow in fiscal '27 and beyond. And I just want to also note that I'm not including revenue here that would be from other products, access networking connectivity that would be incremental to custom. And certainly, we've got a great setup, I think, overall with this account relative to the opportunity set, but it's really on both. And then with respect to the question that our customer may be working with someone other than Marvell on a next-generation XPU, it's just something we can't comment on. That last line was likely the one that spooked investors, especially in a nervous market in which investors seem to be looking for reasons to sell. A lack of a definitive "no," to the rumors about Amazon switching all or part of its custom chipmaking off Marvell's IP may have worried investors over the sustainability of Marvell's ASIC growth. On the other hand, not only did Broadcom report blowout AI numbers of its own, but CEO Hock Tan also noted Broadcom had engaged with two additional potential ASIC customers. Currently, Broadcom has three major ASIC customers. Its biggest is Alphabet for its tensor processing units (TPUs), along with what many believe to be Meta Platforms and China's Bytedance, the owner to Tik Tok. On its previous earnings call in December, Broadcom noted that it had engaged an additional two customers for custom ASICs. But on last week's earnings call, Broadcom said it has now engaged with an additional two potential custom ASIC customers on top of the previous two. While we don't know who those two new customers of interest might be, it could suggest a potential engagement with Amazon. Of course that's highly speculative at this point. Before Marvell investors freak out, some industry sources believe the original two new customers announced in December were Apple and OpenAI, while the two new customers alluded to last week may be Oracle and Elon Musk's xAI. But again, those four potential customers have not been confirmed by Broadcom. In any case, the prospect of having Broadcom add even more customers to its already-larger roster of custom ASIC customers bolstered its stock. Meanwhile, doubts over Marvell hanging on to its single biggest customer longer-term likely dented sentiment. In addition to the differing narratives over custom ASIC customers, valuation likely played a role in both Broadcom's and Marvell's recent fortunes. While Broadcom has more custom ASIC customers and a more diversified business with its high-margin software segment, it still traded at a lower valuation than Marvell heading into last week. Both companies' valuations look extremely high on a GAAP basis, since each has a lot of amortization of intangible assets on its income statements, because of both companies' history of acquisitions. However, unlike the depreciation of property, plant, and equipment, intangibles amortization isn't really an ongoing cost that has to be replaced by capital expenditures, as depreciation is. So in these cases, looking at both companies valuations on a non-GAAP basis is probably appropriate. Marvell made a little over $1.3 billion, or $1.57 per share on a non-GAAP basis in its fiscal year ended in January, which makes its current P/E ratio on adjusted earnings about 46.8 times. Prior to its report earlier this week, the stock traded at 57.3 times. And at its January highs, Marvell traded at 81.2 times trailing earnings. Meanwhile, Broadcom currently trades around 36.3 times trailing-12-month adjusted EPS. Heading into earnings, that figure for Broadcom was just 33.5. Marvell may have been valued higher since it's a smaller company, and most investors seem to think that the smaller a company is, the larger its growth prospects. However, Broadcom has been able to defy those limitations of large numbers. After all, Broadcom's 25% growth last quarter was nearly as fast as Marvell's 27% growth, despite Broadcom being about nine times as large. When comparing two companies, two big elements to consider are customer concentration, as well as valuation. Even though Marvell and Broadcom reported quite similar results, Broadcom's lower valuation and more diversified customer base inspired more confidence relative to Marvell's sky-high valuation and dependence on a large single customer. As we've seen from the excellent results across the Magnificent Seven stocks, big companies can still find ways to grow, especially since only large companies can credibly participate in capital-intensive megatrends such as cloud computing and AI. So in this new world of transformative technology megatrends, sometimes bigger is in fact better.

Broadcom Continues to See Huge AI Opportunity. Should You Buy the Stock Now Before It Soars? | The Motley Fool

Share prices of Broadcom (AVGO -5.39%) initially soared on March 6 after the chipmaker saw robust artificial intelligence (AI) revenue growth in its fiscal 2025 first quarter (ended Feb. 2) and management continued to tout the company's custom AI chip opportunity. Since then, the stock has given back much of its early gains amid the general market malaise. The stock is now down about 21% on the year as of this writing. Let's take a closer look at Broadcom's recently reported results and the custom AI chip opportunity management is pointing out to see if this is a good buying opportunity for investors. CEO Hock Tan got investors excited in December 2024 when he talked about Broadcom's big custom AI chip opportunity with the company's three largest customers. He reiterated that these three "hyperscale customers" (meaning they operate huge data centers) were planning to deploy 1 million AI chip clusters in fiscal year 2027, representing a $60 billion to $90 billion addressable market when including chips and networking equipment for that year alone. Broadcom is currently at around a $16 billion AI revenue annual run rate, so this future opportunity is pretty enormous. Meanwhile, Broadcom said it was actively involved with four other hyperscale companies to develop AI chips. That's up from two last quarter. These four companies are not included in its $60 billion to $90 billion fiscal year 2027 addressable market. It took about 15 months for Broadcom's first custom AI chip customer, Alphabet, to go from designing its custom AI chips to deploying them, which was considered fast. AI once again helped power Broadcom's results in fiscal Q1, with its AI-related revenue soaring 77% to $4.1 billion. Total semiconductor solutions revenue increased 11% year over year to $8.2 billion, as the recovery in its non-AI chip revenue remains sluggish. Infrastructure software revenue, meanwhile, climbed 47% to $6.7 billion. The company attributed this strong growth to transitioning customers from perpetual licenses to subscriptions for VMware, as well as upselling customers to its full solution, which allows the entire data center to be virtualized. It noted that 60% of its VMware customers are now on subscriptions and that 70% of its 10,000 largest customers were now using its full VMware Cloud Foundation (FCF) stack. The segment also saw an uplift from deals being pushed into fiscal Q1 from fiscal Q4. Overall company revenue jumped 25% to $14.92 billion in the quarter, while adjusted earnings per share (EPS) soared 45% to $1.60 (adjusting for its prior 10-for-1 stock split). The results topped analyst expectations for adjusted EPS of $1.49 on revenue of $14.61 billion, as compiled by the LSEG. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, jumped 41% year over year to $10.1 billion. Broadcom continues to produce robust cash flow, with cash flow from operations coming in at $6.1 billion and free cash flow of $6 billion. It ended the quarter with nearly $9.3 billion in cash and equivalents, and $66.6 billion in debt. Its debt is a result of its prior $69 billion acquisition of VMware. Broadcom management forecasted fiscal Q2 revenue to increase by 19% to $14.9 billion, with semiconductor revenue climbing 17% to $8.4 billion and infrastructure software revenue jumping 23% to $6.5 billion. It projected AI revenue to increase by 44% to $4.4 billion, led by a steady ramp-up in deployment of its AI chips and networking products. It expects adjusted EBITDA to be about 66% of revenue, or about $9.8 billion. Broadcom management continues to have a very upbeat outlook for the potential of its custom AI chips. While it is not going to get all the addressable market it sees from its three largest customers (Nvidia's graphics processing units (GPUs) will get their fair share), this is still a big opportunity. Custom AI chips, or ASICs (application-specific integrated circuits), can outperform GPUs for the very specific tasks for which they are designed and help reduce costs. However, they do not have the flexibility of GPUs, which can be used for a broader range of tasks. The addition of two new AI chip customers, bringing its total number of customer AI chip customers to seven, meanwhile, is a big win for the company. Meaningful revenue from these customers will take time to materialize, but it should lead to nice growth in later years. At the same time, Broadcom continues to see good traction with its VMware software business, as it upsells and moves customers to subscriptions and its VFM solution. Its more cyclical chip business continues to struggle, but an eventual rebound would be another boost. If Broadcom can capitalize on its AI opportunities, then its current valuation looks pretty attractive. Its increasing number of custom AI chip customers is a great sign as companies turn more to custom solutions to lower costs and improve performance of specific. While custom chips aren't going to replace mass-merchant GPUs, just carving a solid alternative niche is still a huge opportunity. As such, I think Broadcom is a good option to buy at current levels.

2 Brilliant Growth Stocks to Buy Now and Hold for the Long Term | The Motley Fool

Stocks have been all over the map lately. Some investors are doubling down on their winners while others are taking gains earned over the past few years and trimming positions. No matter your perspective on the market right now, there are still red-hot opportunities. Artificial intelligence is one of the biggest, and two companies are leading the pack: Broadcom (AVGO -5.39%) and Nvidia (NVDA -5.07%). Here's why it may be worth buying these AI growth stocks and holding onto them for years. Broadcom has been on many tech investors' radars, as the semiconductor stock has skyrocketed 200% over the past three years. The company specializes in application-specific integrated circuit (ASICs) custom chips, which are in high demand from tech giants like Alphabet and Meta, and rising data center investments could spur more growth. Broadcom CEO Hock Tan highlighted this opportunity on the company's earnings call for the first quarter (which ended Feb. 2), saying demand continues to grow, and Broadcom's serviceable addressable market is in the range of $60 billion to $90 billion by 2027. Broadcom's AI opportunities have already yielded significant returns. The company's artificial intelligence revenue surged 77% to $4.1 billion in the first quarter, accounting for more than one-quarter of total sales. Even more impressive is that Broadcom is solidly profitable, with GAAP earnings per share of $1.14 in the quarter and $6 billion in free cash flow. A recent pullback in Broadcom's share price -- it's down about 22% over the past month as of this writing (March 7) -- has made the stock a little cheaper than it was before and opened up a buying opportunity. The company's shares have a forward price-to-earnings multiple of 28, a bit more expensive than the forward P/E of 20 for the S&P 500. Nvidia hardly needs an introduction, as the company has become one of the hottest AI stocks over the past few years. Nvidia's top and bottom lines have grown as demand for its AI processors has surged, causing its data center revenue to jump 93% in Q2 fiscal 2025 (which ended Jan. 26) to $35.6 billion. Impressive earnings have followed closely behind. Nvidia's earnings per share were $0.89 in the quarter, an 82% increase from the year-ago quarter. And more growth could be on the way. Nvidia released its new Blackwell AI processor recently, and the company has already generated $11 billion in sales from it, making the "fastest product ramp" in the company's history. With Nvidia holding an estimated 70% to 95% of the AI accelerator market, competition is sparse. Nvidia carved out an early lead in AI processors, and it's now reaping the benefits. With nearly all of the largest technology companies recently announcing hundreds of billions in data center investments, Nvidia should continue to benefit. Tariff uncertainties, lackluster economic data, and concerns that some tech stocks are overpriced have pushed down Nvidia's share price by about 22% over the past three months as of this writing (March 7). But that's made Nvidia's shares more attractively priced, with the stock having a forward P/E multiple of 25, making them not too much more expensive than the broader S&P 500. With the AI wars just heating up and data center demand surging, now could be a good time to start an Nvidia position or add to an existing one.

Nasdaq Sell-Off: 2 Top Stocks to Buy and Hold Forever | The Motley Fool

Fears about a potential recession and a tariff war between the U.S. and its trade partners are causing significant volatility in the stock market. The tech-heavy Nasdaq Composite has taken the brunt of the drop, falling 13.4% since its recent highs in December and 9.5% since the beginning of 2025. While some investors may think running for the hills is the best strategy right now, those with cooler heads have a superb buying opportunity -- if they know where to look. Here's why the recent pullback from Nvidia (NVDA -5.07%) and Broadcom (AVGO -5.39%) stocks is creating a good time to buy these top artificial intelligence (AI) companies. Nvidia's share price has fallen 20.4% since the beginning of the year, which is enough to make even the most level-headed investor question whether the semiconductor company is worth the investment. While some investors are no doubt taking some of the gains they've earned over the past couple of years, it's worth remembering what propelled Nvidia to the front of the AI stock group in the first place: It has a dominant position in AI processors. Nvidia's accelerators still have an estimated 70% to 95% share of the AI chip market. No other company comes close to this position, and Nvidia is the leader at a time when AI spending is ramping up. Nvidia CEO Jensen Huang says that tech companies could shell out $2 trillion over the next five years for data center infrastructure. This is more than just a future opportunity, of course. Nvidia's data center sales spiked 93% to $35.6 billion in the fourth quarter of its fiscal 2025, which ended Jan. 26. Part of that AI chip demand came from Nvidia's new Blackwell processors. They accounted for $11 billion in sales in the quarter, which management called the "fastest product ramp" in the company's history. The big picture shows that AI data center spending isn't slowing down -- it's speeding up. Nvidia's share price may be tumbling, but the company's AI future looks very bright. If you can avoid the market noise, you can pick up Nvidia stock at a discount right now. Broadcom's share price has fallen an identical 20.4% since the beginning of the year, causing uneasiness among some investors. But amid the market turmoil, it's smart to consider the facts about Broadcom's position in the AI market and its ongoing opportunities. First, Broadcom is the leading designer of application-specific integrated circuits (ASICs) used in some AI data centers by the world's largest tech companies, including Meta Platforms and Alphabet. Demand for its processors has soared amid the AI race and caused Broadcom's artificial intelligence revenue to spike 77% in its first quarter (which ended Feb. 2). It reached $4.4 billion. That impressive revenue growth came on the heels of Broadcom's artificial intelligence sales spiking 220% in 2024. The good news for Broadcom is that tech companies will continue to vie for dominance as they build AI data centers, with hundreds of billions of dollars already committed to new AI infrastructure. Here's the bottom line: Market volatility or not, artificial intelligence spending isn't going away. The proverbial AI cat is out of the bag, and no major technology company is backing away from investing in it. This is spurring AI data center spending that will last years, not quarters, and Broadcom is already tapping into it. With Broadcom stock falling, investors are getting the chance to scoop up shares at a discount as the AI boom continues to take off.

Nasdaq Sell-Off: 2 Artificial Intelligence (AI) Stocks Down 20% and 49% to Buy Hand Over Fist on the Dip | The Motley Fool

Technology stocks have hit a rough patch of late as investors have been looking to reduce their exposure to riskier assets in the wake of the tariff-induced trade war, leading to an increase in demand for safer investments. Moreover, investors are worried that a potential increase in manufacturing costs on account of the tariffs imposed by the Trump administration could hurt the prospects of technology companies. So, it is easy to see why investors have become risk-averse of late and are booking profits in tech stocks that delivered impressive gains in 2023 and 2024 thanks to a big catalyst in the form of artificial intelligence (AI). All this explains why the Nasdaq Composite index has entered correction territory. As of Monday's market close, the index was down 13% from its most recent high achieved on Dec. 16 last year. A drop of 10% to 20% in a major index qualifies as a stock market correction, and it remains to be seen how long the ongoing one may last. But then, the recent sell-off in AI stocks has also opened an opportunity for savvy investors to buy top companies at incredibly cheap valuations. I will take a closer look at two Nasdaq stocks in this article that have retreated significantly of late but are sitting on incredible long-term growth opportunities. The Trade Desk (TTD -2.42%) stock has plunged nearly 49% already in 2025, and that's great news for investors as it is trading at a very attractive valuation right now. More specifically, shares of the programmatic advertising company can be bought at 12 times sales, a huge discount to its price-to-sales ratio of 25 at the end of 2024. A big reason why The Trade Desk has retreated so much is because of its poor performance in the fourth quarter of 2024. The company released its results last month and the stock plunged big time as it missed its own revenue expectations thanks to execution issues. However, investors should not miss out on the bigger picture. The Trade Desk operates in the programmatic advertising market, an industry that's expected to generate a whopping $2.75 trillion in revenue by the end of the decade. Programmatic advertising refers to the automated purchasing and selling of ad inventory with the help of AI and machine learning tools, and it allows advertisers to serve ads to the right audience at the right time on the right channel based on real-time data. One thing worth noting is that The Trade Desk has been integrating AI tools into its programmatic advertising platform since 2017. It continues to "look for opportunities to inject AI into our platform," according to CEO Jeff Green. The adoption of AI in the digital ad market is expected to grow at a healthy annual pace of 22.5% through 2033, according to a third-party estimate. So, even though The Trade Desk may face near-term challenges on account of the structural changes that it is making to its sales force and organization, the massive opportunity in the programmatic ad market suggests that it could once again get back on the path of growth. Indeed, analysts are expecting The Trade Desk's growth to accelerate once again. The company ended 2024 with adjusted earnings of $1.66 per share. Analysts are expecting single-digit growth in its bottom line this year, followed by a solid acceleration over the next couple of years. So, the sharp drop in The Trade Desk this year gives investors the chance to buy this AI stock on the cheap, and they may not want to miss this opportunity. If you're looking to add a top AI chip stock to your portfolio right now, look no further than Broadcom (AVGO 3.05%). The company's AI revenue is growing at an incredible pace as customers have been lining up to buy its custom processors and networking chips to tackle AI workloads in the cloud. Specifically, Broadcom's AI revenue shot up a remarkable 77% year over year in the first quarter of fiscal 2025. That was nine percentage points higher than Broadcom's original expectation. What's worth noting is that Broadcom is scratching the surface of a massive AI-related opportunity. The company currently serves three hyperscale cloud customers, who have been deploying its custom AI processors and networking chips in their data centers. It sees a serviceable addressable market worth $60 billion to $90 billion for its AI chips from these three hyperscale customers over the next three fiscal years. That's much higher than the $16 billion annual revenue run rate that its AI business is currently clocking (based on fiscal Q1 revenue of $4.1 billion). However, Broadcom's AI-focused revenue opportunity could be much larger than what it has outlined since it does not count the four additional hyperscalers that it is working with to develop custom AI processors. Not surprisingly, analysts have raised their revenue growth expectations for the next three fiscal years. The impressive top-line growth is expected to filter down to the bottom line as well, with analysts expecting a 36% increase in Broadcom's earnings in the current fiscal year to $6.61 per share. Given that Broadcom is trading at 28 times forward earnings right now, which isn't all that expensive when compared to the 30x earnings multiple of the Nasdaq-100 index, investors are getting a good deal on this semiconductor stock that seems on track to deliver robust earnings growth this year. What's more, Broadcom's huge addressable opportunity suggests that it can maintain healthy levels of growth in the long run as well, making it a no-brainer buy right now following its 20% decline in 2025 so far.

Nasdaq Sell-Off: 3 No-Brainer Artificial Intelligence (AI) Stocks You'll Regret Not Buying on the Dip | The Motley Fool

The current stock market downturn is providing some compelling opportunities for astute investors. After running hard for more than two years, the current bull market is finally taking a well-deserved breather. The Nasdaq Composite has slipped into correction territory, defined as a decline of 10% or more from a recent peak. While it can be unsettling to watch the value of our investing accounts slump, savvy investors will recognize the opportunity that the current downturn represents. We don't yet know if the market has further to fall, but investors with the appropriate long-term outlook and the intention to hold for the coming five to 10 years have the chance to pick up quality businesses at discounted prices. One of the biggest secular tailwinds right now is the rampant adoption of artificial intelligence (AI). While estimates abound, AI could contribute as much as $15.7 trillion to the global economy by 2030, according to accounting firm PricewaterhouseCoopers (PwC). Given the magnitude of the opportunity, seasoned investors should consider viewing the current downturn as a chance to pick up some of the biggest names in AI at a discount. When it comes to internet search, there's Alphabet (GOOGL -1.10%) (GOOG -1.09%), then there's everyone else. Google revolutionized search with its cutting-edge algorithms and accounts for 90% of the worldwide search market, according to web analytics company StatCounter. The company's dominant position in search acts as a springboard for its industry-leading digital advertising, controlling roughly 26% of the market in 2024. Let's not forget Google Cloud, the world's third-largest provider of cloud infrastructure services, controlling 11% of the market, according to data compiled by market analyst Canalys. Alphabet has long deployed AI solutions to inform its search results and ensure that its digital advertising reaches its target market. More recently, however, the company has compiled a suite of the most popular AI models for its cloud users. Furthermore, Alphabet's homegrown Gemini is among the most widely used chatbots, gaining share on market leader, ChatGPT. What makes Alphabet a no-brainer, however, is its valuation. The stock is currently selling for just 20 times earnings, well below its five-year average multiple of 26. Valid concerns about the state of the economy, the potential for a recession, and a remedy from its antitrust case continue to weigh on the stock, which could still have further to fall. But for those with a long-term outlook, Alphabet is a steal at this price. When it comes to social media, Meta Platforms (META 1.29%) is in a class by itself. In addition to its former namesake, Facebook, the company also owns Instagram, WhatsApp, Messenger, and Threads. Its offerings bring in roughly 3.35 billion visitors per month, a user base that is unmatched. This captive audience forms the basis for the company's digital advertising success, with 21% of the market -- second only to Google. However, Meta's foray into AI was a master stroke, thanks to decades of data on its billions of users. Its Large Language Model Meta AI (LLaMA) products have joined the ranks of the world's most widely used large language models (LLMs). While these open-source offerings are free to researchers, the company charges hyperscalers and cloud operators to offer them on their respective platforms. Meta is also offering premium subscriptions to its Meta AI assistant, banking on the future of agentic AI. Like Alphabet, investors have concerns about how Meta will fare if the economy stumbles. That said, for those planning to own for years, if not decades, the opportunity is clear. The stock is currently selling for 25 times earnings, an attractive price for an industry leader with a wealth of opportunity. While it might not be a household name, The Trade Desk (TTD -2.44%) is a leading demand-side platform in the programmatic advertising arena. The company provides a self-serve platform that helps advertisers buy ad space and create, manage, and measure the success of their ad campaigns. The Trade Desk has a long track record of innovation. The company developed its Unified ID 2.0 as the growing industry standard. The system uses encrypted consumer data to provide targeting and measurement, ensuring advertisers reach their target market without sacrificing data security. The Trade Desk also developed OpenPath, which gives advertisers direct access to publishers' premium ad inventory. Later this year, the company will roll out Ventura, its connected TV operating system, which will provide even more granular data. Perhaps most importantly, The Trade Desk recently debuted its AI-powered Kokai platform, which "brings the full power of AI to digital marketing," according to the company. Kokai can access 13 million ad impressions every second, helping advertisers reach the right audience with the right ad at the right time. In a rare misstep, The Trade Desk missed its own guidance for the first time in more than eight years. While transitioning existing customers from Solimar -- its existing platform -- to Kokai, the company hit a few snags. That, combined with the broader market uncertainty, sent The Trade Desk into a slump, with the stock falling more than 50% since it peaked late last year. But one quarter does not a trend make. The stock is currently selling for 33 times forward earnings, its cheapest valuation in nearly five years. This gives astute investors the opportunity to buy a company with a superb track record at a discounted price.

Nasdaq Sell-Off: 2 Pullback Stocks to Buy and Hold for a Decade | The Motley Fool

After a sharp rise the past few years, the stock market has had a rocky start to 2025. Concerns that President Donald Trump's tariff policies could send the economy into a recession have extended the declines for the major market indexes over the last few weeks. The tech-centric Nasdaq Composite (^IXIC -0.18%) has fallen more than 10% year to date at the time of writing. A market sell-off can be unsettling, but also work to your advantage. Warren Buffett got rich taking advantage of periods when strong companies are underestimated, which often comes during a broad market sell-off. And the sharp rise following the previous two market crashes at the onset of the pandemic in March 2020 and again in 2022 shows how profitable it can be to buy stocks when pessimism is at its peak. Here are two reasonably priced growth stocks to buy now and hold for the long term. Nvidia (NVDA 1.66%) is the leading supplier of chips used in data centers for artificial intelligence (AI), but concerns over the potential for slower data center spending in 2025 has sent its share price down 20% year to date. However, investors can take advantage of the dip and buy shares at an attractive valuation. The stock has delivered phenomenal returns over the last five years and has more to offer patient shareholders. A slow economy in the near term is not going to stop the long-term growth in the AI market. This is why Dell'Oro Group says capital spending in data centers could exceed $1 trillion by 2029. Data center operators are making major investments to prepare for the day when every piece of software is powered by AI. Nvidia's revenue doubled last year to $130 billion, with 88% of it coming from sales to data centers. Although it's still unclear what impact tariffs will have on Nvidia's business in the near term, it's the long-term spending increase on new chips that will make Nvidia a larger and more valuable business in the next decade than it is today. Importantly, Nvidia is not just selling chips, or graphics processing units (GPUs). It offers a complete end-to-end system of hardware (GPUs) and software to help AI researchers develop models as efficiently as possible. This is a key reason why Nvidia has such a dominant lead in the data center space. The recent dip has brought Nvidia's price-to-earnings (P/E) multiple down to 24 using this year's consensus earnings estimate. For perspective, the average stock in the S&P 500 is trading at a 28 P/E on trailing earnings. Nvidia offers comparably good value right now that sets investors up for excellent gains in the coming years. Another top stock worth buying on the dip is Amazon (AMZN 1.05%). Its wide selection of goods and convent ordering has won over 200 million Prime members that pay membership fees for free shipping and other perks. Amazon's lead in a $4 trillion e-commerce market is a good reason to invest in the stock, but an even better reason is the long-term growth opportunity in Amazon's cloud computing business. If every software application is using AI one day, that is going to lead to tremendous growth for leading cloud service providers, including the leader, Amazon Web Services (AWS). The insatiable demand for AI services in the cloud accelerated its growth in 2024, with revenue from AWS up 19% year-over-year in the fourth quarter. With AWS generating $115 billion in annualized revenue, it's a major profit driver, contributing half of Amazon's total operating profit. AWS may not deliver strong growth every year, as a recession could weigh on near-term corporate budgets -- if one develops -- but spending on cloud services will certainly be higher in 10 years than it is today, which will benefit the stock. Cost reduction efforts in the retail business and the high-margin revenue from AWS has made Amazon a significantly more profitable business over the past few years. This is evidenced by its booming operating cash flow, which soared 36% to $116 billion last year. The growth in Amazon's cash flow is undervalued. The stock currently trades at 18 times trailing cash from operations per share, which is below its previous five-year average multiple of 25. Amazon shares offer solid value for long-term investors at their current price.

3 AI Chip Stocks to Buy in the Nasdaq Correction | The Motley Fool

The Nasdaq entered correction territory earlier this week, and a number of leading artificial intelligence (AI) semiconductor stocks have been swept up in the market downturn. However, spending on AI infrastructure has not suddenly dried up, and in fact it is still on the rise. The three big cloud computing companies, for example, have budgeted spending a combined $250 billion in capital expenditures (capex) this year largely related to AI infrastructure. Meanwhile, a group of companies led by OpenAI and Softbank have pledged spending $500 billion over the next few years to go toward building AI data centers through Project Stargate. At the same time, AI start-ups and other leading tech companies are also building out AI infrastructure, including Meta Platforms, which plans to spend up to $65 billion on AI infrastructure this year. That's a lot of spending that will benefit AI chip companies this year and beyond. Let's look a three AI chip companies set to benefit that are worth buying during the current Nasdaq correction. Nvidia (NVDA 1.66%) has established itself as the leading AI chipmaker through its market-leading graphics processing units (GPUs). It's been able to establish an approximately 90% market share with GPUs in large part thanks to its CUDA software platform, which was developed to allow its chips to be programmed beyond their original task of speeding up graphics rendering in video games. Nvidia's revenue growth exploded when AI started to become mainstream due to the fast processing times of its chips, which were used to help train AI models and run inference. As AI models advanced, more and more GPUs were required to provide the needed computing power. Meanwhile, the company continued to further increase its software lead by creating a collection of libraries, microservices, and tools designed specifically for AI and high-performance computing. Today, its chips are the backbone of AI infrastructure. Following the recent sell-off, the stock is inexpensive, trading at a forward price-to-earnings (P/E) ratio of under 24 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of below 0.5, with PEGs below 1 typically considered undervalued. While Nvidia is the leader in mass-merchant AI chips, Broadcom (AVGO 3.06%) has been carving out a strong niche in custom AI chips. It helps customers design application-specific integrated circuits, or ASICs. These custom chips are used for very specific tasks and as such have better performance at these tasks while using less power. However, they lack the flexibility of GPUs. After helping Alphabet develop its custom tensor-processing unit (TPU) called Trillium, Broadcom has been gaining increasing interest from new customers. It now has three established customers, who it says represent a $60 billion to $90 billion serviceable addressable market in its fiscal 2026. While Nvidia will likely get its fair share of this AI chip spending, this represents a huge opportunity for Broadcom. Meanwhile, the company also now has four newer custom AI chip customers, including Apple. It took about 15 months for Alphabet's custom chip to go from development to being deployed, which was considered fast. As such, it likely will take a year and half to two years before these new customers can provide some meaningful revenue. Nonetheless, Broadcom is seeing a lot of AI chip momentum. Trading around 28.5 times fiscal 2025 analyst estimates, the stock is attractively priced given the big opportunity in front of it. While Advanced Micro Devices (AMD 0.14%) is the No. 2 player in the GPU market behind Nvidia with about 10% market share, what the company has done a good job at is gaining share in the central processing unit (CPU) market within the data center. While GPUs are known for providing the power, CPUs act more as the brain of the operations. The CPU market for data centers isn't as big as the market for GPUs, but it is still expanding nicely as the AI infrastructure buildout continues. Last quarter, AMD said market share for its EPYC CPUs was well above 50% among hyperscalers, which are companies with massive data centers. The company's CPUs have also been gaining share in the personal computer (PC) retail space, as well. It said it had an over -0% market share on platforms such as Amazon, Newegg, and MindFactory. Meanwhile, the company is still seeing growth in the GPU market. It noted that Microsoft and Meta Platforms are both using its MI300X GPUs, while it has seen strong interest in its next-generation MI350 series GPUs. Meanwhile, it plans to launch its MI400 GPUs in 2026. Currently, there is a pretty big gap between Nvidia's and AMD's software, which will likely keep it a distant second in the GPU market; however, its chips are finding a nice niche on the inference side of the market, which is nicely growing. With a forward P/E of only 15, AMD's stock is inexpensive. Meanwhile, it's doing well in the data center with its CPU chips, while the overall tide in AI spending should help its GPU revenue as well, making the company a solid option to consider buying at these levels.

3 Ways Tech Investors Can Navigate the Artificial Intelligence (AI) Sector Tumble | The Motley Fool

Investor interest in artificial intelligence (AI) stocks surged in 2024, but it looks to be cooling off in 2025. At the time of this writing, powerhouse chipmaker Nvidia (NVDA 1.66%) was down nearly 20% and Broadcom fell by 26% since January 1. Advanced Micro Devices is also struggling, down 23%. Uncertainty about the outlook for the U.S. economy as President Donald Trump implements his tariff plans has contributed to the softness in the AI sector. These tariffs, as well as retaliatory tariffs that Trump has pledged to enact, could cause a decline in global economic activity, and potentially lead to a U.S. recession. Understandably, Wall Street is concerned that many industries will suffer, including AI. There are, however, three concrete ways for tech sector investors to turn these unsettling circumstances to their advantage. Ups and downs in the stock market are normal. Even so, when stocks you own drop in price, it doesn't feel good, and if you're weighing whether to invest, a correction or bear market may give you pause. One action you can take under these circumstances is to identify which AI stocks are likely to be winners over the long run. Whether you already own a stock or are thinking about investing in it, start by reviewing how the business itself is doing -- based on its revenue growth, free cash flow, and indicators such as price-to-earnings ratio and price-to-sales ratio -- rather than focusing on the share price. Good companies for investors have an underlying business model that is showing success through growing sales, and with healthy financials that are reflected in such areas as their gross margin and balance sheet. This is particularly important in the nascent AI sector because a plethora of companies are competing in it, and not all of them will be winners as the market evolves. On the other hand, companies that are seeing year-over-year sales declines could be suffering because of a fundamental issue, such as a struggle to attract customers. If you own stock in a company such as this, consider selling. If that results in a loss, you can at least get some benefit from tax-loss harvesting. An example of a good company is Nvidia. Although its stock has plunged this year, Nvidia recently reported strong results for its fiscal fourth quarter, which ended Jan. 26, when its sales grew 78% year over year to $39.3 billion. Moreover, management expects its revenue to grow to $43 billion in its fiscal Q1, a 65% increase from the prior-year period's $26 billion. The semiconductor giant's business is showing no sign of slowing down, so its share price drop actually creates an opportunity for investors to take action. When the share price of a good company drops, it creates an opportunity to grab shares at a discount. This increases your potential for better returns. Going back to Nvidia, Broadcom, and AMD, the declines in their share prices have left them trading at compelling stock valuations. One way an investor can assess this is by using the forward P/E ratio ratio, which tells you how much investors are willing to pay for a dollar's worth of earnings based on analysts' consensus estimates for the next 12 months. Nvidia and AMD's forward P/E multiples fell substantially in recent months. AMD, in particular, is looking attractively valued at this point -- its forward P/E ratio is nearly half of what it was toward the end of 2024. That said, it's understandable to feel unease about buying stocks when they've dropped recently. What if they fall further? This leads to the third strategy you can make use of. It's always going to be a challenge to predict which way a stock's price will go, particularly in the near term. That's where a dollar-cost averaging strategy can benefit you. This strategy involves building your position in a company over time by purchasing equal dollar amounts of its stock at regular intervals. Consistently buying shares through ups and downs reduces the impact of short-term stock price moves on your returns. Start by finding good companies that have been hit by the current drop in AI stocks and scoop up a few shares now, but have a plan to buy more over time. If you still feel concerned, it's important to reflect on the emotions tied to investing. When you take emotions out of the equation and examine the data, the share prices of good companies tend to increase over time. Since many AI-related businesses are part of the tech-heavy Nasdaq Composite index, here's a look at its performance over the past decade. The Nasdaq tumbled when the COVID-19 pandemic hit in 2020, and again when inflation surged in 2022. Both times, the Nasdaq recovered to reach greater heights. So take heart if you're feeling down about this tumble in AI stocks. History suggests a rebound is likely in the cards for long-term investors.

Nvidia Is Down 26% From Its All-Time High -- Here's How Far It Can Fall, Based on Historic Precedent | The Motley Fool

For well over two years, the stock market has been roaring higher, with all three major indexes -- the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite -- reaching multiple record-closing highs. While select catalysts have played a role in lifting equities, such as stock-split euphoria, better-than-expected corporate earnings, and Donald Trump's November victory, nothing has sustained this rally quite like the emergence of artificial intelligence (AI). Empowering software and systems with the ability to reason, act on their own, and evolve to learn new skills, gives this technology a seemingly limitless ceiling. Although the analysts at PwC pegged the global addressable market for AI at $15.7 trillion by 2030 in Sizing the Prize, the sky truly is the limit if businesses adopt AI solutions at a high rate and the technology gains mainstream utility across a wide swath of industries. No company has been a more direct beneficiary of the rise of AI than Nvidia (NVDA 1.66%). At its peak, Nvidia stock added more than $3 trillion in market value in less than two years. Despite being placed on Wall Street's pedestal, Nvidia stock has shed 26% of its value - calculated from its all-time intra-day high of $153.13 on Jan. 7, 2025, through its closing price of $112.69 per share on March 7. The million-dollar question is: How much further can Nvidia stock fall? Historic precedent can be a useful tool to answer this question. But before making assumptions about the future, it's just as important to understand the path Nvidia took to get where it is today. Investors can make an argument that the AI revolution doesn't occur without Nvidia's hardware. The company's graphics processing units (GPUs) are the effective brains that power split-second decision-making in high-compute data centers. Demand for Nvidia's Hopper (H100) chip and now its successor Blackwell GPU architecture has been off the scales. To build on this point, Nvidia hasn't been afraid to invest aggressively in innovation. Even with its Hopper GPU maintaining well-defined computing advantages over other AI chips, the debut of Blackwell further solidifies its hardware as the fastest. Additionally, Blackwell is considerably more energy efficient than its predecessor. Something else that's undeniably helped Nvidia get to where it is today is AI-GPU scarcity. Even with Taiwan Semiconductor Manufacturing ramping up its monthly chip-on-wafer-on-substrate (CoWoS) capacity -- CoWoS is necessary to package the high-bandwidth memory needed for high-compute data centers -- demand for AI-GPUs has decisively overwhelmed their supply. For Nvidia, it's led to exceptional pricing power and sizable uptick in its gross margin. Nvidia's CUDA platform is also helping to tie things together. CUDA is the toolkit developers rely on to build large language models and get the most out of their Nvidia GPUs. In other words, it's a tool that's helping to keep customers loyal to its ecosystem of products and services. The final piece of the puzzle for Nvidia has been its draw with Wall Street's most-influential businesses. Microsoft, Meta Platforms, Amazon, and Alphabet have consistently been some of Nvidia's top customers. With a better understanding of how Nvidia became one of Wall Street's most-valuable businesses, let's return to the question at hand: How far could its stock fall? Although history can't concretely predict the future with 100% accuracy, it does have an uncanny track record of rhyming, more often than not, on Wall Street. Based solely on historic precedent, Nvidia stock has plenty of downside to come. For starters, every next-big-thing technology and innovation for the last three decades has endured an eventual bubble-bursting event. This is to say that investors have consistently overestimated the early innings adoption rate of a new technology or innovation, along with its early stage utility. All hyped innovations need time to mature, and there's nothing to suggest that artificial intelligence is going to be the exception to this historic correlation. If investors dive into the companies building out their data center infrastructure and AI solutions, they'll find that most aren't anywhere close to optimizing this technology, nor are they generating a positive return on their AI investments. These are hallmarks of investors overestimating the adoption and utility of a next-big-thing trend, and it points to a bubble forming. Previous bubbles of game-changing technologies, such as the internet, 3D printing, blockchain technology, and the metaverse, to name a few, saw the leading businesses of these trends lose in the neighborhood of 80% to 90% of their value on a peak-to-trough basis. However, there's an asterisk to this historic data. The market leaders of next-big-thing trends that were hit the hardest over the last three decades often weren't diversified. Prior to the AI revolution taking shape, Nvidia was selling GPUs for PC gaming and cryptocurrency mining, and it had a well-established virtualization software segment. This is to say that these existing segments would more than likely provide a notably higher floor if the AI bubble were to burst. With few exceptions, such as Palantir Technologies' P/S ratio of nearly 100 three weeks ago, market leaders of next-big-thing innovations have peaked at P/S ratios in the neighborhood of 30 to 40 over the last 30 years. This is true of Microsoft, Amazon, Cisco Systems, and Nvidia, the latter of which topped out at a P/S ratio of 42.39 last summer. As of the closing bell on March 7, market leaders Alphabet, Meta Platforms, and Microsoft were commanding respective P/S ratios of 6.3, 9.9, and 11.2. Even after Nvidia's 26% pullback, it's still trading at a multiple of roughly 21.4 times sales. To simply align with other Mag-7 stocks, in terms of P/S ratio, Nvidia could easily shed a little over half of its value. This would take its share price down to around $55 from a peak of $153.13. History also teaches investors that early stage scarcity tied to a hyped innovation doesn't last. While Nvidia has benefited immensely by charging a significantly higher price for its H100 and Blackwell GPUs, a ramp-up in production by competitors, coupled with growing internal competition (most of Nvidia's top customers by net sales are developing their own AI-GPUs), spells big trouble for its pricing power and gross margin. Though Nvidia stock might appear attractively valued to some investors, historic precedent points to additional downside.

The Nasdaq Just Hit Correction Territory: 2 Brilliant AI Stocks to Buy Now and Hold Forever | The Motley Fool

Warren Buffett has often endorsed a contrarian investment strategy. "Tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy," he wrote in his 2013 letter to shareholders. Uncertainty surrounding the Trump administration's trade policies has caused the technology-focused Nasdaq Composite (^IXIC -0.18%) to fall more than 10% from its recent high. That puts the index in correction territory. Investors should follow Buffett's advice and treat the drawdown as a buying opportunity. Here's why Nvidia (NVDA 1.66%) and Amazon (AMZN 1.05%) are worth owning forever. Semiconductor company Nvidia reported excellent financial results in the fourth quarter. Revenue increased 78% to $39 billion on strong growth in the data center segment driven by demand artificial intelligence (AI) hardware. Non-GAAP net income increase 71% to $0.89 per dilute share. The only blemish was a 3-point decline in gross margin, but CFO Colette Kress says that figure will rebound as Blackwell sales ramp this year. DeepSeek shook investor confidence in Nvidia earlier this year when it reportedly trained a sophisticated large language model with much less money (and less powerful chips) than U.S. rivals like Anthropic and OpenAI. But worries about a decline in AI infrastructure spending have so been unfounded. DeepSeek's efficient training methods may even boost demand for Nvidia chips by making AI affordable for more companies. What makes Nvidia a compelling forever-investment is the durability of the AI boom. While generative AI is currently the focal point, physical AI promises to gradually steal the spotlight in the years ahead. Physical AI is the technology that will let autonomous machines like cars and robots understand and interact with the physical world. Nvidia is well positioned to be a winner in those markets. Nvidia GPUs are the most coveted AI accelerators on the market, and its dominance is due to a combination of better hardware and a more extensive software ecosystem. Most AI projects rely on Nvidia's CUDA platform, which includes tools that help programmers write applications for autonomous cars and robots. That should keep the chipmaker at the forefront of the AI revolution for many years. As a caveat, Nvidia stock has declined nearly 30% from its high and it may continue falling in the coming weeks. But shares look attractive right now. Nvidia current trades at 24 times forward earnings, the cheapest valuation multiple in the past 12 months. Patient investors should feel comfortable buying a position today. But keep cash in reserve to capitalize on further declines. Amazon reported encouraging fourth-quarter financial results that beat expectations on the top and bottom lines, but missed revenue estimates in the advertising segment. Total revenue increased 10% to $187 billion, operating margin expanded more than 3 percentage points, and GAAP net income increased 86% to $1.00 per diluted share. Amazon is a compelling forever investment because of its strong presence in three growing industries. It runs the largest online marketplace outside of China and is on pace to be the world's largest retailer in 2025. Strength in retail has led to a booming advertising business; Amazon is the third largest ad tech company worldwide. And Amazon Web Services (AWS) is the largest public cloud in terms of revenue and customers. Morgan Stanley analysts see Amazon as an underappreciated generative AI leader in retail and cloud services. They expect the company to "capture a larger portion of consumer wallets and see its operational advantage to deliver more items faster and more profitably than peers widening." Likewise, AWS as the largest public cloud is ideally positioned to capitalize on demand for generative AI infrastructure services. Amazon stock has fallen 20% from its high, but remains a top pick at Morgan Stanley. Wall Street anticipates adjusted earnings will grow 14% in 2025. That makes the current valuation of 35 times adjusted earnings look relatively expensive. But Amazon topped the consensus estimate by an average of 29% in the last six quarters. If that pattern continues, and I think it will, the current valuation would be cheap in hindsight.

Nasdaq Correction: This Magnificent Stock Is a Rare Bargain | The Motley Fool

In recent years, investors showed their optimism about the future by flocking to high-growth stocks -- and that pushed the prices of some of these players into the stratosphere. The idea was these companies would benefit from a potentially lower interest-rate environment ahead, and, in many cases, the development of artificial intelligence (AI). And speaking of AI, companies connected to AI in particular stood out, their stocks advancing in the double and triple digits, helping fuel double-digit increases in the Nasdaq in 2023 and 2024. This excitement spilled over into this year, too, driving the tech-heavy benchmark higher through the middle of last month. In recent days, though, the momentum screeched to a halt on concerns about the economy and even the possibility of a recession. What sparked these fears? President Donald Trump launched tariffs on imports from Canada, China, and Mexico -- opening the door to rising prices that could hurt corporate earnings and the customer's wallet. As a result, benchmarks tumbled, and the Nasdaq even entered correction territory last week, falling more than 10% from its most recent high on Dec. 16. No one likes to see stocks tumble. But one positive thing the movement brings is the opportunity to get in on quality companies at a valuation you never would have believed possible. Looking for an example? This magnificent stock is a rare bargain right now. This particular player has been one of the top performers of the AI boom, posting the biggest gain in the Dow Jones Industrial Average last year and generating double- and triple-digit revenue growth quarter after quarter. The company has built an AI empire and this has translated into a solid leadership position. Which player am I talking about? AI chip giant, Nvidia (NVDA 1.66%). Before we discuss the stock's dirt cheap valuation, let's take a quick look at the story so far. Nvidia makes graphics processing units (GPUs), or the chips that powers crucial AI tasks like the training and inferencing of models. What's key is Nvidia's GPUs are the most powerful around, and as a result, the world's biggest tech companies -- from Microsoft to Meta Platforms -- flock to Nvidia for them. This created surging demand, with it surpassing supply, for Nvidia's latest release -- the Blackwell architecture. So, even though companies had to wait to get their hands on Blackwell, they were willing to do so, knowing that it could supercharge their AI projects. All of this, as mentioned, has led to soaring revenue at Nvidia, and the recent reporting period is no exception. The company posted triple-digit revenue growth to a record of $130 billion for the 2025 fiscal year that ended Jan. 26, 2025, and in its very first quarter of commercialization, Blackwell brought in $11 billion. Importantly, Nvidia has consistently been very profitable on sales, with gross margin topping 70%. This is fantastic, but you might wonder why it makes sense to be optimistic about Nvidia moving forward into the next several years. Nvidia is keenly focused on innovation, promising to update its GPUs on an annual basis, and this should make it very tough for rivals to encroach on its territory. This is an internal factor that Nvidia can control to a certain degree. The external factor is linked to big tech spending on AI, and here, especially in times of economic uncertainty, investors may worry. But tech giants such as Meta and Alphabet, for example, have recently set out plans for tech spending to make it to their AI goals, and this supports the idea for more growth ahead for Nvidia. Even if an economic slowdown delays certain companies' long-term AI projects, it's unlikely it would completely derail them. Companies already are well into these program, and these are programs they are counting on for growth. All of this means that there's reason to be optimistic about Nvidia's prospects even if the markets are facing headwinds at the moment. Now, let's talk valuation. Nvidia often traded for more than 48 time forward earnings estimates in recent months, but declines have brought valuation down to a shockingly low level of 23 times earnings estimates. This is the stock's lowest level by this measure in more than a year. And this makes it one of the three cheapest "Magnificent Seven" stocks right now. The "Magnificent Seven" are a group of high-profile tech stocks that have driven market gains in recent years, and they've each seen their prices and valuations decline in recent days. Considering Nvidia's likelihood of staying ahead in the AI market and strong future revenue prospects as the AI boom continues, this magnificent stock is a rare bargain right now, and one to snatch up during the Nasdaq correction.

This Artificial Intelligence (AI) Stock Could Be the Best Investment of the Decade | The Motley Fool

Investors always want to find the next big thing. That's especially true in the fast-moving technology sector. Just look at how quickly revenue and earnings have exploded for Nvidia (NVDA 1.66%) over the last 18 months. While revenue nearly tripled in that time, earnings per share for this artificial intelligence (AI) leader soared 287%. There are going to be many other winners in the AI space as well as other technology sectors. Every retail investor would like to find the next Nvidia. But sometimes investors try to get too cute. Sometimes, the next big winner is the one you already know. The surge in Nvdia's business came from its data center segment. Nvidia has exposure to much more than just data centers, but it makes sense to focus on it for now. It currently dominates the business. Full-year revenue from its data center business rose 142% to $115.2 billion in the recently reported fiscal year. That astounding rate of growth is understandably slowing. Yet a steady cadence of new, more powerful AI platforms will help keep revenue increasing. Even against more difficult year-over-year comparisons, the company's guidance for the first quarter of fiscal 2026 -- expected to be reported in May -- indicates 65% revenue growth. The continued strong demand comes as production of Nvidia's Blackwell AI architecture is in full gear. In the fiscal 2025 fourth-quarter conference call held in late February, Nvidia CFO Colette Kress said Blackwell customers "are racing to scale infrastructure to train the next generation of cutting-edge models and unlock the next level of AI capabilities." The company isn't resting, either. Its next-generation Rubin platform is expected to be launched in 2026. CEO Jensen Huang will be delivering the keynote address at Nvidia's GTC 2025 conference on March 18. The global AI conference for developers is a likely place for Huang to discuss the benefits customers expect from Blackwell and the upcoming Rubin technology. When looking to the next decade, investors should also consider Nvidia's business segments other than the data center. Gaming continues to be a multibillion-dollar business for Nvidia. Last year, revenue increased 9% to $11.4 billion. However, it may be the automotive and robotics segment that will be the next big catalyst. Fourth-quarter sales more than doubled to a record $570 million. That could be just the beginning. Assisted and autonomous driving systems are becoming more widespread. Nvidia announced that Toyota will build its next-generation vehicles using Nvidia's Drive platform. The embedded operating system will also be used by the growing number of fully autonomous vehicle manufacturers. The potential for autonomous vehicles and robotics is immense. Yet those future benefits aren't being priced into Nvidia stock. Investor focus seems to be completely on whether data center sales growth can continue. That's led to an opportunity for investors. Nvidia shares are about where they were six months ago after having declined nearly 20% in the past three months. Even with several potential future catalysts, the stock is trading near its lowest price-to-earnings (P/E) ratio in three years. While that 38 P/E is still relatively expensive, it's measured on a trailing-12-month basis. Looking ahead, though, the P/E looks very reasonable, or even cheap. A forward P/E of about 25 makes for an attractive entry point. Considering the remaining runway for growth in its data center business, along with potential catalysts that could meaningfully grow in the coming years, buying Nvidia stock now could be the best investment of the decade.

Nasdaq Sell-Off: The 2 Smartest Stocks to Buy and Hold Forever | The Motley Fool

Tariffs and talk of a recession have been making major headlines this week, and the market is reacting with predictable volatility. The Nasdaq Composite (^IXIC -0.18%), which features a riskier, tech-loaded group of stocks, is in correction territory, 13% off its recent highs as of this writing. While some investors may be running for the hills, or at least to safer stocks, savvy investors recognize that this could be an excellent buying opportunity. But it's only worth buying top stocks that you can be confident will rebound and soar much higher. Amazon (AMZN 1.05%) and MercadoLibre (MELI 2.34%) fit the bill. Amazon has incredible potential in all its businesses, but the excitement today is in the generative artificial intelligence (AI) opportunity. Amazon's AI business already has a multi-billion-dollar run rate, and McKinsey estimates a long-term opportunity of $4.4 trillion. CEO Andy Jassy continually expounds on the opportunity ahead for Amazon. He sees a huge shift coming where companies move to the cloud, where the bulk of the generative AI development is happening. Amazon is already seeing an uptick in its cloud business, Amazon Web Services (AWS). Sales increased 19% year over year in the fourth quarter, and it went back to being Amazon's fastest-growing business. Jassy says that current company spend is still 90% on the premises, which creates a mind-boggling opportunity as it switches to the cloud. The generative AI piece is speeding that up. He also envisions generative AI becoming an essential component of application development, presenting the need for every company to be on the cloud and using generative AI services. That's not to mention Amazon's e-commerce business, which is still its largest. It's investing in efficiency actions to speed up delivery times and cut costs, and it's adding tons of new brands and products to maintain its leading position and make sure it can account for as many of its customers' purchases as it can. It recently launched a new program called Amazon Haul, where shoppers can find low-priced items in one place. It's also a formidable player in streaming, where it now owns MGM Studios and has its own original content, and where it can feature video-based ads -- not to mention its robust advertising business. Amazon has a long growth runway. Down 19% from its recent highs, it trades at a forward, 1-year price-to-earnings (P/E) ratio of 26, which is a great deal on a top stock. MercadoLibre's main business is also e-commerce, but it's still in a hyper-growth stage. E-commerce in its Latin American region lags about 10 years behind the U.S., with only 13% penetration. That gives it a long runway, and it's harnessing the opportunity with exploding growth rates. Revenue increased 96% in the 2024 fourth quarter year over year (currency neutral), and gross merchandise volume was up 56%. These are typical numbers for MercadoLibre, and it doesn't look like it's going to slow down anytime soon. It's reinforcing its position as it benefits from strong network effects. This led to growth in unique buyers, which increased from 85 million to 100 million in 2024. As buyers discover the platform, they engage at higher rates, and buyers in three or more categories are climbing. So is average purchase frequency. Average quarterly items purchased per buyer increased from 7.1 to 7.8 in 2024. It has phenomenal delivery speeds, with 72% of items delivered throughout its network within 48 hours at the end of 2023. That was actually a slowdown, because it now offers a weekly delivery day option for customers in Meli+, its membership program. That offers an incentive for customers and ultimately saves costs. Like Amazon, it has entered new businesses, and it's expanding its platform to include a large assortment of financial services like digital payments and asset management. It's on its way to getting a bank charter in Mexico, where it's planning to launch a digital bank, and its goal is to become the largest digital bank in the country. In Q4, total payment volume increased 49% year over year, while assets under management increased 74% to $6.6 billion. MercadoLibre stock is 13% off its recent highs, but that's a short-term blip. At the current price, it trades at a forward, 1-year P/E ratio of 31, an excellent price for a high-growth, high-opportunity stock that you can hold forever.

Nasdaq Correction: 5 Reasons Nvidia Stock Is Still a Top Artificial Intelligence (AI) Stock to Buy Right Now | The Motley Fool

Artificial intelligence (AI) stocks have sold off heavily over the past few weeks, with Nvidia (NVDA 1.66%) being one of the hardest-hit stocks, down around 30% from its all-time high. However, I don't think this sell-off is a sign of things to come; instead, it's a buying opportunity for investors with a long-term view. I've come up with five reasons why Nvidia will be all right, although there are likely more because this giant is at the center of everything AI. Nvidia makes graphics processing units (GPUs) that power AI training and inference. Because GPUs can compute in parallel, they dramatically increase the number of tasks they can do simultaneously, which is incredibly useful for arduous tasks like AI. GPUs can be connected in clusters to amplify this effect, which is why they have become the tool of choice for anyone working in the AI field. Although a massive amount has been spent on AI computing hardware, we're still in the early stages of AI adoption. The AI hyperscalers (those spending the most money to build AI infrastructure) have all indicated that 2025 will be a year of record spending on AI-related hardware. This clearly points to the fact that we're far from done building the infrastructure needed to power society and business with AI. As a result, investors need to understand that AI isn't a short-term trend; it's a long-term mindset shift as to how businesses run and operate. Nvidia is also making huge advances in chip technology, as evidenced by its latest Blackwell architecture. Blackwell is the successor to the incredibly popular Hopper architecture, and the gains Blackwell makes over its predecessor are quite impressive. Blackwell can train AI models four times faster than Hopper and has 30 times greater inference speeds. The inference gains are noteworthy, as inference is becoming more important as the need shifts from training these AI models to actually using them. Blackwell GPUs will become the new industry standard in AI training, and as Nvidia continues to ramp up production to meet demand, we'll see huge growth. Nvidia has put up impressive revenue growth figures over the past two years, growing revenue 265% year over year in fiscal year 2024 and 114% in fiscal year 2025. In fiscal year 2026, Wall Street analysts expect 56% growth. While that indicates slowing revenue growth in general, you'd be mistaken if you think this represents a slowdown. The law of large numbers is working against Nvidia because its growth seems to be slowing. In fiscal year 2024, Nvidia's total revenue increased by $34 billion, and in fiscal year 2025, it increased by $70 billion. If Wall Street analysts' projections come true, Nvidia's fiscal year 2026 revenue will increase by $74 billion. While the percentage gains are decreasing, the raw amount of revenue that Nvidia is adding to its total is accelerating, which shows that AI demand is still quite strong and growing. One of the concerns with Nvidia was management's projection that gross margin would take a dip at the start of the year. The biggest fear here was that Nvidia was losing its pricing power, and other alternatives were becoming more attractive, forcing it to cut its prices. However, this is a false assumption, as Nvidia's management stated that this initial dip in gross margin is due to Nvidia ramping up Blackwell production as fast as possible to start off. This will inherently cause more issues and scrap, but Nvidia stated that it will become more efficient at producing these chips throughout the year, which is when its gross margins should recover to the mid-70% range. While this is something to keep an eye on, I don't think investors should get too worked up over this decline right now. After the sell-off, Nvidia's stock is reasonably priced. You'd have to go back to 2019 to find the last time Nvidia's trailing price-to-earnings (P/E) ratio was this cheap. But that's a poor metric to focus on considering the strong growth Nvidia expects in FY 2026. With Nvidia's forward P/E sitting at 25, it looks like a very attractive stock, and I think it's a perfect stock to buy during this sell-off, as multiple long-term trends will push the stock higher for years to come.

4 Artificial Intelligence (AI) Stocks Worth Buying in the Tech Sell-Off | The Motley Fool

With the latest market sell-off hitting tech stocks much harder than any other sector, I think it's smart to start looking for bargain-buying opportunities in this area. Whether there's a trade war or not, the artificial intelligence (AI) arms race isn't going to slow down, as one company isn't going to cut its AI spending just because another does. Instead, that company will likely see it as an opportunity to gain ground on a competitor. As a result, these companies will be just fine over the long term, making this short-term blip a fantastic buying opportunity. The four companies I'm focusing on right now are Nvidia (NVDA 4.86%), Taiwan Semiconductor Manufacturing (TSM 0.19%), Alphabet (GOOG 1.31%) (GOOGL -1.10%), and Amazon (AMZN 1.95%). I think each is a fantastic buy amid the latest market sell-off and should be bought on the dip. Why do these four stand out above the rest? Each is a service provider in the AI arms race. Taiwan Semiconductor's chips go into nearly any high-tech device. Because it is a chip foundry, it manufactures the chip designs that other companies (like Nvidia) bring to it. Many investors feared that Taiwan would be the target of some of President Trump's tariffs, but with TSMC's latest $100 billion investment in U.S. manufacturing capacity, it may have sidestepped this threat. However, TSMC's CEO, C.C. Wei, commented that a threat from President Trump didn't cause this expansion. Instead, his company sees massive U.S. chip demand, and it makes sense to build factories where the demand is. This backs up Wei's earlier projection that AI-related chip revenue for his company is projected to rise at a 45% compound annual growth rate (CAGR) over the next five years. Companywide revenue is expected to reach nearly 20% growth over that same period, so it's clear that Taiwan Semi has massive chip demand coming. A market sell-off doesn't change that fact, so investors shouldn't be too worried about Taiwan Semiconductor's stock. Nvidia is a huge customer of TSMC, as its graphics processing units (GPUs) are filled with chips from TSMC's facilities. GPUs have been widely used in the AI buildout because of their ability to compute in parallel. This makes them ideal for tasks that require massive computing power, like training an AI model. Nvidia has had an incredible two years of growth, but it's not stopping yet. In Q1, they expect 65% revenue growth to $43 billion. While Nvidia doesn't give full-year guidance, Wall Street analysts project 56% growth to $204 billion. During its Q4 conference call, Nvidia was asked about what tariffs would do for its business, but the management side-stepped the question, stating that they don't really know what the U.S. government's plan is. Still, the demand for Nvidia's GPUs is insatiable, and with the stock trading for an unbelievably cheap 25 times forward earnings, it's time to load up on Nvidia stock. Amazon and Alphabet both have primary businesses that power their AI investments. However, both businesses are trying to build out their cloud computing footprint, which will be used to provide computing power to many clients. Cloud computing is a huge trend in the AI arms race, as many companies don't want to spend the massive upfront cost to buy a data center filled with expensive Nvidia GPUs to train AI models and run them. Instead, they turn to cloud computing providers, like Amazon Web Services (AWS) and Google Cloud, to run these workloads. Essentially, Amazon and Alphabet's customers are renting computing power from these giants, and the demand here is far from done growing. Over the long term, cloud computing will be a huge part of both companies' businesses, as each sector is growing faster than the overall business. In Q4, Google Cloud's revenue grew 30% year over year while companywide revenue increased at a 12% pace. AWS revenue grew 19% year over year versus a total growth of 10%. As a further boost to buy these stocks, both are the cheapest they have been for some time. With each stock trading at attractive price-to-forward earings, I think they are both strong buys now alongside Nvidia and Taiwan Semiconductor.

3 Artificial Intelligence (AI) Stocks You Can Buy and Hold for the Next Decade | The Motley Fool

Nvidia, Broadcom, and Taiwan Semiconductor are all reliable long-term plays on the AI market. The artificial intelligence (AI) market has grown rapidly over the past decade, with the development of more powerful chips and more advanced algorithms. New generative AI platforms such as OpenAI's ChatGPT also introduced AI to mainstream users. That AI boom isn't over yet. According to Grand View Research, the global AI market could expand at a compound annual growth rate of 36.6% from 2024 to 2030 as more industries optimize their businesses with AI technologies. But with so many AI stocks, it can be tough to separate the winners from the losers. Let's discuss three resilient blue-chip stocks that could easily profit from the AI market's secular expansion over the next decade: Nvidia (NVDA 1.66%), Broadcom (AVGO 3.06%), and Taiwan Semiconductor Manufacturing (TSM 0.19%). Nvidia is the world's largest producer of discrete graphics processing units (GPUs). These chips were once mainly used for gaming and professional visualization applications, but they're now widely used in data centers to process complex machine learning and AI tasks. All of the world's top AI companies, including OpenAI and Microsoft (NASDAQ: MSFT), use its chips. Unlike central processing units, which process a single piece of data at a time, GPUs can process a wide range of integers and floating point numbers simultaneously. That efficiency makes them the picks and shovels of the AI gold rush, and Nvidia's first-mover advantage in that space gives it a massive advantage against its smaller competitors. In fiscal 2025, which ended in January, Nvidia's sales of data center chips surged 142% and accounted for 88% of its top line. Its total revenue soared 114%, as its adjusted earnings per share (EPS) jumped 130%. For fiscal 2026, analysts expect its revenue and adjusted EPS to grow another 56% and 50%, respectively, as the AI boom continues. Nvidia's stock has already soared nearly 1,600% over the past five years, but it still isn't expensive at 26 times forward earnings. Its growth will inevitably cool down over the next decade, but its stock should continue rising as the AI market expands. Broadcom, which was known as Avago until it acquired the original Broadcom in 2016, is a diversified chipmaker and software maker. It's one of the world's largest producers of mobile, data center, networking, wireless, storage, and industrial chips. It expanded into the software market by acquiring CA Technologies, Symantec's enterprise security unit, and VMware. Broadcom is not nearly as dependent on the AI market as Nvidia, but it sells plenty of networking, optical, and custom accelerator chips for AI-oriented data centers. Its sales of those AI chips more than tripled in fiscal 2024, which ended last November, and accounted for 24% of its top line. Its total revenue, which was boosted by its takeover of VMware, and adjusted EPS increased 44% and 15%, respectively, for the full year. For fiscal 2025, analysts expect Broadcom's revenue and adjusted EPS to rise 21% and 36%, respectively, as it fully laps its takeover of VMware. During its latest conference call, CEO Hock Tan said it saw a "massive" opportunity in the AI market "over the next three years" as its AI semiconductor business outgrows its sales of non-AI chips. Broadcom's stock has already rallied more than 620% over the past five years, but it still looks reasonably valued at 31 times forward earnings. It should remain a well-balanced play on the growing AI and cloud markets for the foreseeable future. Lastly, Nvidia, Broadcom, and other fabless chipmakers can't produce their top-tier chips without Taiwan Semiconductor, the world's largest and most advanced contract chipmaker. TSMC manufactures the smallest, densest, and most power-efficient chips, and it controls nearly two-thirds of the global foundry market, according to TrendForce. In 2024, TSMC generated 51% of its revenue from the high-performance computing market, which includes Nvidia and other high-end chipmakers. Another 35% of its revenue came from the smartphone market, while the rest came from the smaller automotive, Internet of Things (IoT), and digital consumer electronics markets. TSMC's revenue and EPS grew 30% and 40%, respectively, in 2024. Most of that growth was driven by its orders from Nvidia and other AI-oriented chipmakers. It expects that market to stay hot as its other non-AI markets -- particularly in PCs, smartphones, and memory chips -- warm up once again. Analysts expect its revenue and EPS to grow 28% and 29%, respectively, in 2025. TSMC's stock has risen more than 220% over the past five years, but it still doesn't look expensive at 20 times forward earnings. Its valuations are being compressed by some near-term concerns about tariffs, export curbs, and tensions between Taiwan and China, but it will remain a foundational stock of the AI market for years to come.

Prediction: Nvidia Will Beat the Market. Here's Why.

The past three months haven't been great for Nvidia (NVDA 1.66%) investors as shares of the graphics card specialist have dropped nearly 20% during this period, dropping at a much faster pace when compared to the S&P 500 index's drop of 8%. Nvidia's tepid performance can be attributed to factors outside the company's control, such as export controls on its chips and the potential impact of the tariffs being imposed by the Trump administration. But what's worth noting here is that the chipmaker's financial performance remains robust amid all the noise. This was evident from the company's latest quarterly report for the fourth quarter of fiscal 2025 (which ended on January 26). Nvidia's results were better than expected, and its guidance suggests that it is on track to sustain its healthy growth rate in the new fiscal year. More importantly, there are new catalysts coming into play for Nvidia that could pave the way for long-term growth at the company. Let's take a closer look at those catalysts and check why they could help this technology giant beat the market in the long run. New growth opportunities can help Nvidia sustain its impressive growth Nvidia's data center business has been in the limelight for the past couple of years, driven by the outstanding demand for the company's graphics processing units (GPUs) for training artificial intelligence (AI) models. However, investors shouldn't forget that Nvidia came into prominence because of the personal computer (PC) market. The company's GPUs have been used in PCs and workstations for a very long time to handle intensive workloads such as gaming and content creation. In fact, gaming was Nvidia's biggest business just five years ago, accounting for nearly half of its top line. However, Nvidia saw the opportunity for accelerated computing in data centers and was quick to roll out chips to tackle AI workloads five years ago, leaving competitors such as Advanced Micro Devices and Intel in the dust. Its A100 processor, which was launched in 2020, gained immense popularity as it was used to train OpenAI's ChatGPT. Nvidia kept pushing the envelope in the data center GPU market since then, making its chips more powerful to quench the need for more computing power to train AI models. Tech giants spent billions of dollars on Nvidia's AI GPUs to train large language models (LLMs) in a bid to stay ahead in the AI race. Now, the company is targeting the other aspect of the AI market: inferencing. AI inference is the next stage of training in which the AI model is put to work. According to one estimate, the market for chips used for AI inference could see an annual growth rate of 35% through 2031. Nvidia is already tapping this massive opportunity. That's not surprising, as Nvidia points out that its latest Blackwell AI chips are designed with AI inference in mind. Nvidia CFO Colette Kress remarked on the latest earnings conference call that many of the early deployments of its Blackwell systems are "earmarked for inference, a first for a new architecture." She also added that the company has achieved a 200x reduction in AI inference costs in just two years. So, it won't be surprising to see Nvidia's AI inference revenue getting bigger in the long run, allowing the company to maintain its terrific share of the AI chip market, which is expected to generate over $1.1 trillion in revenue by 2032. Meanwhile, Nvidia management's comments on the latest earnings call suggest that its automotive business is set to step on the gas. Nvidia generated $1.7 billion in automotive revenue in fiscal 2025, an increase of just 5% from the prior year. However, the company is expecting its automotive revenue to nearly triple this year to $5 billion. The company points out that the terrific growth in its automotive business this year will be driven by the growing compute demand in vehicles to support autonomous functions. More importantly, Nvidia is building a solid ecosystem of customers that includes the likes of Toyota, Hyundai, Uber, BYD, Volvo, Mercedes-Benz, and others, that are developing automotive solutions using its hardware and software offerings. Even better, Nvidia's automotive business has a lot of room for growth in the long run, as the company estimates a total addressable market (TAM) worth $300 billion. In all, Nvidia's total addressable opportunity across different segments stands at $1.7 trillion. The company generated just under $131 billion in revenue in the previous fiscal year. So, the size of its addressable market suggests that it still has a lot of room to grow its revenue and earnings in the long run, which is why it won't be surprising to see the stock soar once again going forward. Nvidia's earnings growth potential and valuation point toward a solid jump in the stock price Nvidia finished fiscal 2025 with non-GAAP (adjusted) earnings of $2.99 per share, up by an impressive 130% from the previous year. Looking ahead, analysts are expecting Nvidia to maintain its robust earnings growth rate. NVDA EPS Estimates for Current Fiscal Year data by YCharts Consensus estimates are projecting Nvidia's earnings to hit $6.42 per share in fiscal 2028. Assuming that the stock trades at 30 times earnings at that time, in line with the tech-laden Nasdaq-100 index's earnings multiple (using the index as a proxy for tech stocks), its stock price could hit $193 in three years. That would be a jump of 75% from current levels, suggesting that this tech stock has the potential to regain its mojo and deliver market-beating returns over the next three years. Given that Nvidia is trading at just 25 times forward earnings right now, the time seems right for investors to add this semiconductor bellwether to their portfolios, as it still has enough fuel in the tank to keep growing at healthy rates for a long time and deliver above-average returns to investors as a result.

Nasdaq Stock Market Correction: Is Nvidia a Screaming Buy Right Now? | The Motley Fool

In just a matter of weeks, tech stocks have gone from stretching to all-time highs to plunging on concerns around tariffs and even a recession. As of March 11, the Nasdaq Composite (^IXIC 1.35%) has fallen 13.6% from its closing peak on Dec. 17, 2024. The tech-heavy index was hovering around all-time highs as recently as Feb. 19. In Wall Street terms, the Nasdaq is now in a correction, defined as a decline of 10% or more from a recent closing peak. Understandably, investors were spooked by weakening consumer sentiment reports, chaos surrounding the on-again, off-again tariffs U.S. President Donald Trump has rolled out, and news that key economic bellwethers like Delta Air Lines and other airlines have cut their guidance for the first quarter. There's a lot of uncertainty in the stock market right now, but seasoned long-term investors know that sell-offs like these can present buying opportunities. One stock, in particular, has gotten a lot of attention from investors in the AI era. That stock, Nvidia (NVDA 6.75%), has now lost more than any other on a market-cap basis in the recent retreat. The AI chip leader has seen roughly $1 trillion in market value wiped away since its peak earlier this year. This period has included the threat from DeepSeek AI, an underwhelming response to the company's fourth-quarter earnings report, and macro-level concerns around consumer sentiment, global economic growth, and business investment. Nvidia is now down 27% from its peak earlier this year, setting up a potentially appealing buying opportunity for the fast-growing semiconductor stock. Should investors capitalize on the sell-off or wait until the volatility settles? Let's take a closer look at what to expect from Nvidia stock. While Nvidia has faced some negative headlines this year around DeepSeek and the actual return on investment its customers are getting from AI, the company's growth remains stellar. In the fourth quarter, its revenue jumped 78% to $39.3 billion. While that was a slower rate than in previous quarters, that's still much faster than any company of its size is growing. Nvidia expects its superior growth rate to continue. It's calling for around $43 billion in revenue in the first quarter, or 65% growth from a year ago. With numbers like that, investors shouldn't doubt that the near-term outlook for the business remains strong. Nvidia also seems to be in an enviable position for the medium term. Demand for its new Blackwell platform continues to outstrip supply, and the company is ramping up production of the new components faster than it has for any product in its history. Over the longer term, the company's prospects still seem bright. The race to artificial general intelligence (AGI) seems unlikely to be derailed even by a global recession, and the company's cutting-edge technology is likely to play a role in future innovations that investors can't yet see. The semiconductor sector has boomed over the last decade, and demand for chips that power everything from data centers to appliances to self-driving cars seems almost certain to grow over the next decade. Any stock can move lower in the short term, and that's certainly true of Nvidia. The semiconductor sector is cyclical, and the stock is likely to react poorly to signs that the economy is weakening. However, in addition to its prospects above, Nvidia stock is also surprisingly cheap after the recent pullback. It now trades at a forward price-to-earnings (P/E) ratio of just 24, which is comparable to the S&P 500's forward P/E of 20.7. Considering that Nvidia doesn't seem to be directly at risk from tariffs or the simmering trade war and that demand for its cutting-edge products continues to soar, the stock looks like a bargain. Short-term volatility shouldn't dissuade long-term investors from taking advantage of the sell-off in Nvidia shares. Down nearly 30% from its peak, the AI leader looks like an excellent buy right now.

Nasdaq Stock Market Correction: Is Nvidia Stock a Buy at 27% Off Its High? | The Motley Fool

The artificial intelligence (AI) chip giant's stock is trading at an attractive valuation. Nvidia (NVDA 4.94%) stock has been a fantastic medium- and long-term winner and even a winner over the last year. But shares of the artificial intelligence (AI) chip and technology leader have been having a tough time recently. Nvidia stock closed at $108.76 on Tuesday, March 11, which represents a decline of 19% in 2025 and a drop of 27.2% from its all-time closing high of $149.43, reached on Jan. 6 of this year. For context, the S&P 500 and the tech-heavy Nasdaq Composite indexes are down 5.3% and 9.7%, respectively, in 2025 through March 11. Moreover, the S&P 500 is 9.3% lower than its all-time closing high, set on Feb. 19. And the Nasdaq is 13.7% off its all-time closing high, reached on Dec. 16 of last year. Nvidia stock's recent sizable pullback begs the question: Does the stock's current price look like an attractive buying opportunity? Before we get into the topic of valuation, it's important to understand the main reasons Nvidia stock has been struggling. There are three main reasons: concerns the U.S. government could enact additional AI chip export restrictions to China, Trump administration tariffs, and concerns about AI spending that arose from Chinese start-up DeepSeek's launch of its R-1 AI model. The first two factors caused Nvidia stock to fall 9.8% last week, although the overall market also had a very bad week, with the S&P 500 and Nasdaq indexes down 3.1% and 3.5%, respectively. The DeepSeek news resulted in Nvidia stock plunging 17% in January. The fear about the potential for additional export controls on AI chips was stoked by an article in The Wall Street Journal published on Sunday, March 2, that alleged "Chinese buyers are circumventing U.S. export controls" on Nvidia's new Blackwell chips -- its most advanced AI chips for data centers -- by routing systems containing the chips through third parties. The tariff-fueled stock sell-off began on Monday, March 3, and has continued. There has been much action on this front, but the top happenings (not including threats that didn't materialize) through March 11 include: As to DeepSeek, its announcement in late January that torpedoed Nvidia stock was that it had trained an open-source AI model for much less money than U.S. companies have spent training their models. This ignited concerns about a potential slowdown of spending on Nvidia's AI tech. Yes, I think the Nvidia stock sell-off is overdone. As to DeepSeek, many market watchers have expressed skepticism about some of its key claims. Moreover, there are no indications that the big tech companies plan to slow their purchases of Nvidia's technology. As to tariffs, the market hates uncertainty, so it makes sense that the U.S. government's back and forth actions on tariffs are hurting stocks, Nvidia included. That said, it's an unknown how much tariffs could affect Nvidia's business. But I don't think they will hurt it materially. The company's tech -- specifically its new Blackwell chips along with its networking products -- is in incredibly high demand. Even if Nvidia has to increase some prices to cover new tariffs on components, it seems very unlikely its customers -- at least its major ones -- will dial back on their purchases. Nvidia's Ai-enabling tech is widely considered by big tech companies as essential. Whether the U.S. will further beef up controls on AI chip exports to China is anyone's guess. To be sure, Nvidia would lose some more business in China, but it would not be a catastrophic loss. For context, in fiscal year 2025 (ended in late January), Nvidia's sales to China accounted for 13.1% of its total revenue, according to its 10-K filing with the Securities & Exchange Commission (SEC). Two caveats: Nvidia's revenue by geographic area is based upon billing location of the customer, not shipping location. And the 13.1% figure includes sales of all products billed to Chinese customers, not just AI-related data center sales. The above chart shows Nvidia stock's forward price-to-earnings (P/E) ratio ratio over the last few years. Its current forward P/E is 24.2, which means that the stock is priced at 24.2 times Nvidia's projected (by Wall Street) adjusted earnings per share (EPS) growth over the next 12 months (fiscal 2026). For forward P/E ratios, it's very important to keep in mind that one metric in the equation -- earnings (or EPS, to be exact) -- is based on a projection or estimate (usually Wall Street's), not an actual result. This is an important distinction because Wall Street analysts have consistently -- and usually significantly -- underestimated Nvidia's earnings growth potential since I have been closely following the stock, which is about eight years. This means that for many years, Nvidia stock's forward P/E ratio has been overstated. In other words, the stock's valuation based on forward P/E ratios has proven (in retrospect) to be consistently too high. The above chart shows Wall Street's consensus estimates for Nvidia's average annual earnings growth over the long term (five years). Currently, analysts expect the company to grow earnings at an average annual rate of 32.8% over the next five years. This represents strong growth. But keeping in mind Wall Street's trend of underestimating Nvidia's growth potential, this figure has a good chance of being higher, in my opinion. However, even if the 32.8% figure turns out to be accurate, Nvidia stock would be attractively valued given its forward P/E of 24.2. So, yes, Nvidia stock is a good buy for long-term-focused investors.

The Nasdaq Just Hit Correction Territory: This Magnificent AI Stock Is a Rare Bargain

The Nasdaq index is now in correction territory, meaning it is now more than 10% down from its all-time high. While this may seem like a big deal, 10% corrections tend to occur just about every year, so this is something that investors must understand happens quite frequently. Because this happens regularly, investors shouldn't panic; instead, it's time to start looking for bargains that could be even more heavily hit than the broader market. My biggest value to buy right now is Nvidia (NVDA 6.75%), one of the best artificial intelligence (AI) stocks out there. At this writing, it's down nearly 30% from its all-time high and looks like a dirt-cheap bargain. Nvidia's stock is going through the biggest drawdown during its multiyear run Nvidia makes graphics processing units (GPUs), which are used for arduous computing tasks. Because they can process multiple calculations in parallel, they are well suited for tasks like AI training. While there are other competitors in the GPU space, Nvidia's options are superior in multiple ways, and it has become the clear pick in this space. With companies investing billions in their AI infrastructure, Nvidia has become the primary beneficiary of this spending, which has caused its stock to rocket higher over the past few years. At its peak, Nvidia's stock was up 922% since the start of 2023. That's an incredible run, and it's one of the main reasons why the stock is being sold off so aggressively. Investors want to take profits before they disappear, so this sell-off disproportionately affects Nvidia. However, plenty of tailwinds are pushing Nvidia higher, and investors need to take advantage of the biggest sell-off the stock has seen since its run began in 2023. NVDA data by YCharts Nvidia will be all right even if the market has its doubts 2025 is slated to be a record year of capital expenditures from many of the big tech companies. The vast majority of this expense is going toward building out AI computing capacity, which will benefit Nvidia. Furthermore, Nvidia's latest chip architecture, Blackwell, is starting to become more widely available, which means some clients may be upgrading their existing GPUs with more advanced versions. These are all positive effects for Nvidia's stock, and they add to Wall Street's projection that Nvidia's revenue will rise 56% to $204 billion this year. However, the big caveat here is that it will require big tech companies to continue spending a lot of money to reach that projection. The fear is that economic weakness brought on by trade wars could cause these AI hyperscalers to cut their spending, which would harm Nvidia. However, I don't see that playing out, as each company competes to establish AI supremacy. If they see a competitor get worried about economic conditions and cut spending, it may encourage them to continue their spending levels to gain ground. Many of these companies have massive cash flows and huge cash piles, so it is also not a big deal to continue spending like this. While it may concern some investors in the short term, it's in every company's best interest to continue investing in AI resources over the long term, which will benefit Nvidia. As a result, I think Nvidia's stock is still a buy here, especially given its current price tag. The stock looks like a great deal right now During Nvidia's run, the stock has seldom been considered cheap. However, I think we've reached that point, as it now trades for 36 times trailing earnings and 24 times forward earnings. NVDA PE Ratio data by YCharts That's the cheapest Nvidia has been in some time, and I think investors need to take advantage of it while it is fairly cheap. I'm not sure when this sell-off will end, but I know that Nvidia will emerge relatively unscathed on the other side (at least from a business perspective) due to the massive AI investments that are occurring. I think Nvidia is a fantastic stock to buy here, but I wouldn't be surprised if the market continues to decline until some positive headlines pull it out of the decline.

Prediction: Nvidia Will Soar Over the Next 5 Years. Here's 1 Reason Why. | The Motley Fool

Nvidia (NVDA 6.43%) doesn't develop large language models. It doesn't create computer game franchises. It doesn't manufacture humanoid robots or autonomous vehicles, either. What Nvidia does is create the computing hardware technologies needed for all of these efforts. Companies around the world are devoting capital to these projects. Nvidia has been, and will continue to be, a leading computing supplier for these technologies. With a product suite that offers hardware, software, and other expertise, it should stay at the forefront as businesses keep advancing and innovating. Yet that's not the real reason Nvidia stock can soar over the next five years. A stock market correction can be a long-term investor's best friend. The Nasdaq Composite index has now entered correction territory since its closing high of 20,174 on Dec. 16. One result of the market downturn is a more than 20% drop in Nvidia shares so far this year. Large companies are investing hundreds of billions of dollars in artificial intelligence (AI) infrastructure, a big reason Nvidia generated over $130 billion in revenue last year. Management predicts the first quarter of Nvidia's fiscal 2026, which began in late January, will see 65% revenue growth over the year-ago period. That impressive increase is likely to slow as the year progresses and it faces tougher comparisons. But new catalysts could reaccelerate sales growth in the coming years. Those include growing business outside of data centers for Nvidia. The company's gaming segment increased revenue by 9% last year. Professional visualization -- which includes a new personal AI supercomputer -- grew sales by 21%, while robotics and automotive revenue soared 55%. Nvidia has many irons in the fire that could all meaningfully contribute over the next five years. With shares trading nearly 30% below early January highs, now is a good time to follow Warren Buffett's advice and buy this great stock while others are fearful.

1 Top Artificial Intelligence (AI) Chip Stock to Buy Hand Over Fist Before It Jumps | The Motley Fool

2025 has been a difficult year for artificial intelligence (AI) semiconductor stocks so far, as the sector has been hit hard by a spate of negative news that has led investors to overlook the strong results that companies in this sector have been delivering. Broadcom (AVGO 2.18%), however, managed to buck that trend by handsomely crushing Wall Street's expectations and delivering solid guidance when it released its fiscal 2025 first-quarter results (for the quarter ended Feb. 2) on March 6. Shares of the chip designer jumped more than 8% the following day.was well-placed to beat consensus expectations What's worth noting is that Broadcom stock is still in the red this year, down 20% as of this writing. But the good part is that it can still be bought at an attractive valuation. Let's take a closer look at the reasons why investors are upbeat about Broadcom's latest results and check why this semiconductor stock is worth buying right now. Broadcom is known for designing application-specific integrated circuits (ASICs), which are programmed to perform specific tasks instead of general-purpose computing. The demand for these customizable chips has increased thanks to growing demand for AI training and inference, as they carry a cost and performance advantage over graphics processing units (GPUs) sold by the likes of Nvidia. This explains why major cloud service providers have been turning to Broadcom to develop custom AI processors to lower their AI infrastructure costs. The robust demand for Broadcom's AI chips and networking components was the biggest reason behind the 25% year-over-year jump in its revenue and the 45% spike in its earnings per share. The company sold $4.1 billion worth of AI chips and networking solutions last quarter, an increase of 77% from the year-ago period. Broadcom management points out that its AI revenue exceeded its expectations by $300 million last quarter on account of stronger-than-expected demand from its cloud customers. Broadcom management added on the latest earnings conference call that its "hyperscaler partners continue to invest aggressively in their next-generation frontier models, which do require high-performance accelerators, as well as AI data centers with larger clusters." As a result, the company is ramping up its research and development (R&D) efforts to churn out more capable custom AI processors to help its customers tackle bigger AI workloads. Broadcom points out that it currently has three hyperscale cloud customers using its AI chips. The company has aligned its R&D efforts with these three customers through fiscal 2027. That's not surprising, as Broadcom believes that they can open up a serviceable revenue opportunity worth $60 billion to $90 billion over the next three years. What's worth noting is that Broadcom was already "deeply engaged with two other hyperscalers in enabling them to create their own customized AI accelerator" in addition to its three existing customers. Even better, it has brought another two cloud hyperscale customers on board since December. The company has specified that the massive revenue opportunity it sees over the next three years excludes the potential revenue that it could get from its four new customers. So, Broadcom's AI-powered growth is just getting started. The company is now getting just over 27% of its revenue from AI, but that figure is likely to move higher thanks to the huge addressable market that Broadcom sees in this segment. Not surprisingly, analysts have bumped their revenue growth expectations. The good news for Broadcom investors is that the growing mix of AI-related revenue is positively impacting margins. More specifically, Broadcom's gross margin from its semiconductor business increased by 70 basis points year over year last quarter, allowing the company to exceed its overall gross margin expectations. Given that Broadcom's AI business has immense room for growth, it won't be surprising to see the company's margin profile getting better. This explains why analysts are expecting Broadcom's earnings growth to accelerate. With the stock trading at 30 times forward earnings right now, it isn't too late for investors to buy it. The tech-laden Nasdaq-100 index has an identical average earnings multiple. Assuming Broadcom manages to generate $9.12 per share in earnings after three years (as per the chart of estimates above) and still trades at a P/E multiple of 30, its stock price could hit $274. That would be a 48% increase from the stock price as I write this. However, this AI stock could deliver much stronger gains than that, as the market could put a premium on its valuation on account of its improving growth profile and the lucrative AI-focused opportunity it is sitting on. That's why savvy investors would do well to buy Broadcom stock before it soars even higher.

2 No-Brainer Stocks to Ride a Potentially Trillion-Dollar AI Wave | The Motley Fool

Artificial intelligence (AI) stocks were last year's biggest winners, leading the Nasdaq, the S&P 500, and the Dow Jones Industrial Average to double-digit gains. This is thanks to investors' enthusiasm for the technology's potential to spark game-changing advancements -- from automating certain tasks throughout a company to helping researchers discover better drugs faster. All of this could supercharge companies' revenue growth and stock performance. Investors, aiming to get in early on this major story, piled into AI stocks, and these players in many cases delivered double- and triple-digit gains in 2024. This momentum continued into the new year -- until recently. Concerns about the economy and President Donald Trump's tariffs on imports from Canada, China, and Mexico have weighed on the overall stock market, and growth stocks such as AI players have been hit particularly hard. But here's the good news for AI investors. The AI story hasn't changed. Companies still are investing billions of dollars in AI infrastructure and platforms, and analysts predict that today's $200 billion AI market will reach $1 trillion by the end of the decade. And today, following recent price declines, you have the opportunity to get in on these stocks at dirt cheap levels. Let's check out two no-brainer stocks to ride the potentially trillion-dollar AI wave. Nvidia (NVDA 6.43%) started out offering graphics processing units (GPUs) -- the chips that power crucial AI tasks like the training and inferencing -- to the AI market, but didn't stick to just that. The tech giant has built a complete AI empire, offering customers everything from networking to software, and is therefore able to accompany them on their entire AI journey. This has translated into soaring earnings for Nvidia, with revenue rising in the double or triple digits. In the latest full year, revenue surged 114% to a record $130 billion. And an important point that stands out is this is at a high level of profitability on sales, with gross margin consistently topping 70%. Nvidia serves all of the major tech companies -- from Meta Platforms to Microsoft -- as they build out their AI infrastructure and platforms. These companies have the financial strength to continue investing, and their desire to win in the AI boom suggests they'll stick with the most powerful products. Not only does Nvidia make the best-performing chip around, but the company's focus on innovation and pledge to update its GPUs annually suggest its dominance will continue. Finally, as mentioned, Nvidia's expansion throughout the areas of AI means it has what it takes to excel through every stage of AI growth -- from the infrastructure buildout to the application of AI to real-world problems. Today, trading at 24 times earnings estimates, down from as much as 50 just a few weeks ago, Nvidia is a must-buy for any AI investor. You may think more of e-commerce than anything else when you think of Amazon (AMZN 1.17%). But along with being an e-commerce leader, the company also has become an AI giant. Amazon benefits from AI in two ways: by applying it to its e-commerce business to gain in efficiency and by selling AI products and services through its Amazon Web Services (AWS) unit. AI has helped reduce the e-commerce business's "cost to serve," for example, by designing the shortest and fastest delivery routes for packages. And you may be familiar with Rufus, Amazon's AI shopping assistant, which has been improving the shopping experience for customers, which is key to keeping them coming back. But where Amazon truly is hitting it out of the park is through AWS. The unit recently reached a $115 billion annual revenue run rate thanks to its AI products and services. Amazon offers everything a customer may need along the AI path -- from premium Nvidia chips and Amazon's own lower-cost chips to a fully managed AI service called Amazon Bedrock that helps you build generative AI applications. And since AWS is the world's leading cloud services provider, it has immediate access to a huge audience of potential customers. Amazon stock right now is trading for 31 times earnings estimates, down from more than 45 late last year. The company's successes in AI so far and its market position make it a no-brainer stock to ride the trillion-dollar AI wave.

Broadcom's AI Growth Is Unstoppable. Is the Dividend-Paying Growth Stock a Buy Now? | The Motley Fool

Shares of Broadcom (AVGO 2.18%) are up more than 780% in the last five years, pole-vaulting its market cap to over $900 billion. Besides being one of the most valuable companies in the world, it is also one of the most exciting investment opportunities in artificial intelligence (AI). Here's why Broadcom's innovation is kicking into a higher gear, and why this growth stock is a buy now. Diversification is the single most compelling reason to invest in Broadcom over other semiconductor stocks. Nvidia makes most of its sales and operating income from graphics processing units (GPUs) for data centers and AI applications. Advanced Micro Devices has a growing GPU business but is still heavily dependent on CPU sales for consumers, professional clients, and gaming. And it hasn't yet proved that it can take market share from Nvidia. Broadcom is unique because it combines a rapidly growing AI segment with an established networking business and a massive infrastructure software business thanks to its acquisition of VMware. The semiconductor segment provides networking solutions, server storage, broadband, wireless, and industrial solutions for enterprise clients, hyperscale data centers, and residential clients. The infrastructure software segment provides solutions for mainframes, cybersecurity storage area networking, and cloud infrastructure. In total, Broadcom has an integrated global-connectivity product and services business that is in a league of its own. The company's blend of legacy products and services and upside potential from AI makes it an intriguing stock for investors looking for a balance of growth and value. In its latest period, which was the first quarter of fiscal 2025, AI revenue grew 77% to $4.1 billion -- meaning AI alone made up 27.5% of total revenue. The infrastructure software segment grew 47% thanks to the impact of VMware. So, Broadcom is benefiting from a savvy acquisition and industry tailwinds in AI. Its AI is centered around its XPUs and connectivity solutions for AI data centers. XPUs are accelerator chips, more formally known as application-specific integrated circuits (ASICs). They are built for specific tasks and can be cheaper but less flexible than GPUs. The company's accelerator chips and connectivity switches are received well by hyperscalers. And Broadcom plans to massively improve the efficiency of this hardware in the coming years. Management believes it will rapidly grow sales to the three hyperscale clients that make up its core, and two more hyperscalers that have become increasingly interested in its solutions. Management is pouring money into research and development to build the next generation of high-processing-power XPUs and clusters of 500,000 accelerators for hyperscale customers. Eventually, it believes it can reach clusters of 1 million accelerators for these customers, which will help the company tap into its addressable market that is forecast to reach $60 billion to $90 billion by fiscal 2027. The growth in AI is helping offset a cyclical slowdown in other areas of its business. Semiconductor revenue not associated with AI fell 9% year over year, which Broadcom attributed to a seasonal decline in wireless sales and a bottoming out in broadband sales. Growing demand for Broadcom's XPU chips is a significant catalyst for long-term growth, as is its software segment. VMware cloud foundation (VCF) is a software-as-as-service platform for computing, storage, networking, and cloud management services. On the latest earnings call, CEO Hock Tan said the following about potential growth in the software business: We are upselling customers to a full-stack VCF, which enables the entire data center to be virtualized. And this enables customers to create their own private cloud environment on-prem [on premises]. And as of the end of Q1, approximately 70% of our largest 10,000 customers have adopted VCF. As these customers consume VCF, we still see a further opportunity for future growth. Broadcom's combination of network connectivity hardware, AI accelerator chips, and software solutions for enterprise customers and data centers illustrates the sheer depth and breadth of the business. With multiple avenues for monetizing AI, the company can get more business from its top hyperscale clients. Broadcom is a complete business with tremendous growth potential. The only question now is whether the stock is still a good value or has become too expensive. Analyst consensus estimates for fiscal 2025 earnings are $6.60 per share, and $7.81 per share in fiscal 2026. After popping 8.6% on March 7 in response to its earnings and guidance, the stock is now around $195 per share. At that price, it has forward price-to-earnings ratio of 29.2 based on fiscal 2025 results. That's reasonable for a high-octane growth stock with multiple ways to profit from AI. The cherry on top of Broadcom's underlying investment thesis is its dividend. Thanks to exponential earnings growth, the company rapidly increased its dividend. Even after the stock's massive run-up in recent years, it still yields 1.2%. That's comparable to the yield of the S&P 500 even though Broadcom is growing far faster than the average company in the index. Broadcom remains one of the best chip stocks (and tech stocks in general) to buy now. Nvidia also stands out as a solid buy, but Broadcom is arguably a better foundational holding because of its diversification and track record for earnings and dividend growth. Meanwhile, Nvidia's growth has exploded higher over the last couple of years, making it more difficult to value. Broadcom generates plenty of free cash flow to ramp up spending on research and development, allowing it to push the bounds of what is possible in AI. Add it all up, and it's one of the best all-around stocks to buy now.

2 Artificial Intelligence (AI) Stocks to Buy Before They Soar 82% and 124%, According to Certain Wall Street Analysts | The Motley Fool

These two companies are compelling bargains amid the current sell-off in AI stocks. The recent pullback in the stock market may have some investors on edge. The stocks selling off the most over the last couple of weeks are the same ones that led the stock market higher over the previous two years: artificial intelligence stocks. Several factors have led to the recent dip in the biggest AI stocks, including advances by China's DeepSeek AI and growing economic uncertainty. However, experts still expect a lot of growth in artificial intelligence over the coming years. The total AI market could grow from $233 billion in 2024 to $1.77 trillion by 2032, according to research published by Fortune Business Insights. That could mean right now is a great opportunity to buy some of the most underpriced AI stocks for the long run. Two stocks look particularly appealing amid the pullback in stock prices and present upside of up to 124%, according to certain Wall Street analysts. Here's why investors should take a closer look at Datadog (DDOG 0.07%) and Advanced Micro Devices (AMD 4.17%). Datadog enables businesses to monitor data across all their technology platforms, helping them identify problems quickly and fix them before they grow widespread. As more and more businesses shift more of their workloads to the cloud and expand their integrations with AI, Datadog's services become increasingly important. The company disappointed investors with its outlook for slower-than-expected revenue growth and earnings growth in 2025. Analysts have since revised down their estimates. But Loop Capital maintains its $200 price target on the stock, implying 82% upside, as of this writing. The analyst sees a strong runway for Datadog's total addressable market to continue expanding well into the next decade. That's driven by Datadog's continual product expansion into new markets, including AI and security. If Datadog captures just a small percentage of that market, it'll see strong earnings growth as it scales. Datadog is already seeing strong growth in what it calls "AI-native customers." These are companies whose products or services are based heavily on their AI capabilities. These customers accounted for 6% of Datadog's annual recurring revenue in the fourth quarter, double the prior-year quarter. That growth rate could continue as more AI businesses enter the market and seek Datadog's observability capabilities and existing customers expand their needs as they grow. While these AI-native customers account for a small but rapidly growing portion of Datadog's business, the company's AI features are useful to anyone using large language models to improve their business operations. Datadog's LLM observability service helps businesses identify errors produced by large language models and what caused them. It can also monitor operational metrics, including costs and performance, which can help businesses optimize the efficiency of their LLMs and the services calling them. On top of that, Datadog developed its own AI-powered assistant, called Bits AI. The tool allows users to interact with Datadog's observability platform using natural language to identify what's going wrong in their systems and generate incident summaries. That makes the platform more accessible to more users. About 3,500 of Datadog's approximately 30,000 customers are using at least one of its AI integrations as of the end of 2024. That's up from 2,000 customers as of May 2024. Datadog stock trades at an enterprise-value-to-revenue multiple of about 13. That's not exactly cheap, but it's about as cheap as the stock has ever been. Considering the company could grow its top line at a 20% rate for years to come and has room to improve its margins as it scales, it may be worth buying at this price. Coming into 2024, AMD was well-positioned to take a bigger share of the rapidly growing market for graphics processing units (GPUs). As big tech spent heavily on data centers, AMD's AI accelerators were a cheaper alternative to Nvidia's top-of-the-line chip and its proprietary CUDA platform. However, AMD continued to take a back seat to Nvidia. AMD further disappointed investors with its outlook calling for a 7% sequential decline in total sales during the first quarter. During the earnings call, management confirmed the data center segment, which includes its AI chips, will see a similar decline. But AMD's time may be coming. Rosenblatt's Hans Mosesmann has a price target of $225 on the stock, implying 124% upside as of this writing. He believes AMD management's forecast for the total addressable market for data center GPUs to grow to $500 billion by 2028. He sees the chipmaker as taking a "double-digit market share" in that market. If AMD captures just 10% of the data center AI accelerator market in 2028 (i.e., $50 billion in revenue) it'll grow its data center business fourfold from 2024. And there's reason to believe its market share should rise into the double digits as more businesses look to drive the cost of AI inference lower over the long run, making the high-end Nvidia chips less essential. But AMD is more than a GPU maker. Its x86 central processing unit (CPU) chips are extremely competitive and taking market share in both the PC and server markets. Management said it ended 2024 with well over 50% share at the majority of its CPU data center customers, driven by demand for its latest EPYC CPUs. Despite not growing as fast as Nvidia in the GPU market, AMD is still generating strong revenue and earnings growth. Analysts expect 23% growth this year followed by 21% growth in 2026. On top of that, AMD has room to expand margins while still offering reasonably priced compute options for its customers. Management expects its operating margin to expand from 24% in 2024 to the mid-30% range over the long run. Right now, AMD shares trade for just 21 times forward earnings. That's a bargain for an AI stock. But it looks even more appealing when you consider the potential for earnings growth. Analysts expect 35% earnings growth in 2026. It's hard to find that kind of growth potential at such a low price.

Why Broadcom Stock Was Moving Higher Today | The Motley Fool

Broadcom reported 25% revenue growth, which included a benefit of about three weeks of its acquisition of VMware, to $14.9 billion. That beat analyst estimates at $14.6 billion. Investors were particularly impressed with the company's artificial intelligence (AI) revenue growth, which was up 77% to $4.1 billion, driven by 47% growth in infrastructure revenue to $6.7 billion. In its other segment, semiconductor solutions, revenue rose 11% to $8.2 billion. Broadcom continued to generate exceptional profit margins, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $10.1 billion, or a 67% margin. On the bottom line, the company reported adjusted earnings per share of $1.60, up from $1.10 in the quarter a year ago, and ahead of the consensus at $1.51. Touting strength across its business, CEO Hock Tan said, "We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers." Broadcom has long been seen as a winner from AI, and that forecast is starting to bear fruit, as these numbers and Tan's comments indicate. Looking ahead to the second quarter, the company expects revenue of $14.9 billion, up 20% from the quarter a year ago and in line with estimates. It also called for a 66% adjusted EBITDA margin, indicating profits should be similar to the first quarter. Given the strong growth and momentum in AI, it's not a surprise to see the stock gaining today.

Broadcom Stock Pops as Earnings and Outlook Beat Expectations on Strong Demand for Custom Artificial Intelligence (AI) Chips | The Motley Fool

Shares of Broadcom (AVGO 6.24%) gained 12.8% in Thursday's after-hours trading, following the semiconductor and infrastructure software maker's release of its report for the first quarter of fiscal year 2025 (ended Feb. 2). The stock's rise is attributable in part to the quarter's revenue and earnings, along with second-quarter revenue guidance beating Wall Street's expectations. In addition, the stock got a boost from very bullish comments CEO Hock Tan made on the earnings call. The relative strength of these catalysts can be teased out based on the stock's movement during after-hours trading. Shares had gained about 9% after the earnings release up through 5 p.m. ET, when the call started. They then shot up more than 7% about five minutes into the call (though eventually gave back some of this gain), which is when Tan shared news about the company's custom artificial intelligence (AI) chip business. His comments follow below. Data source: Broadcom. *Calculations by author, except for revenue growth, which the company provided in the earnings release. YOY = year over year. GAAP = generally accepted accounting principles. Fiscal Q1 2025 ended Feb. 2. Investors should focus mainly on the adjusted numbers for operating and net income, which exclude one-time items. Wall Street was looking for adjusted EPS of $1.51 on revenue of $14.6 billion, so Broadcom exceeded both expectations, with the profit beat quite comfortable. It also surpassed its own revenue guidance of $14.6 billion. And it beat its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) outlook of 66% of revenue, as this profitability metric was 68%. The company does not provide earnings guidance. In the quarter, Broadcom generated cash of $6.1 billion running its operations, up 27% from the year-ago period. It generated free cash flow (FCF) of $6.0 billion, or 40% of revenue, up 28% year over year. The company ended the quarter with cash and cash equivalents of $9.3 billion, essentially unchanged from the prior quarter, and long-term debt of $60.9 billion. Data source: Broadcom. YOY = year over year. Broadcom's November 2023 acquisition of VMware drove the revenue growth of the infrastructure software segment. The semiconductor segment's revenue growth was driven by strong AI product growth, offset by continued weakness in non-AI products. AI semiconductor revenue surged 77% year over year to $4.1 billion. AI products include custom AI chips -- which are application-specific integrated circuits (ASICs) -- for hyperscalers and Ethernet networking products for AI data centers. (Hyperscalers are large tech companies that operate huge cloud data centers.) The following are CEO Hock Tan's comments on the earnings call that I referenced at the top of this article. [W]e do reaffirm what we said last quarter that we expect these three hyperscale customers will generate a Serviceable Addressable Market, or SAM, in the range of $60 billion to $90 billion in fiscal 2027. Beyond these three customers, we had also mentioned previously that we are deeply engaged with two other hyperscalers in enabling them to create their own customized AI accelerator. We are on track to tape out their XPUs this year. [S]ince our last earnings call ... two additional hyperscalers have selected Broadcom to develop custom accelerators to train their next-generation frontier models. ... [T]hese four are not included in our estimated SAM of $60 billion to $90 billion in 2027. For the second quarter of 2025 (which ends May 4), management expects: Going into the report, Wall Street had been modeling for Q2 revenue of $14.7 billion, so the company's revenue outlook was higher than this expectation. In the earnings statement, Tan said the company expects "AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs [custom AI chips] and connectivity solutions for AI data centers." In short, Broadcom turned in a strong report, and the information management shared on the earnings call is bullish for the company's future AI-powered growth.

Broadcom Exceeds Fiscal Q1 Expectations

The tech giant surpassed earnings and revenue expectations for the first quarter of its fiscal 2025, with robust growth in sales of AI semiconductor solutions and infrastructure software. Broadcom (AVGO 3.46%), a leading global technology company known for its semiconductor and infrastructure software solutions, released its fiscal 2025 first-quarter earnings on March 6. The company exceeded expectations with non-GAAP earnings per share (EPS) of $1.60 against the analysts' consensus prediction of $1.51. Revenue grew 25% year over year to $14.916 billion, outpacing estimates by $301 million. This robust performance reflected the strong demand for AI semiconductor solutions and infrastructure software. Source: Analyst estimates provided by FactSet. Overview of Broadcom's Business and Key Focus Areas Broadcom is best known for its extensive array of semiconductor products, including solutions for networking, broadband, and wireless communication. Additionally, it provides infrastructure software solutions that facilitate efficient IT operations. Recently, Broadcom acquired VMware to enhance its software offerings. Expansion in AI technologies remains a significant focus area for Broadcom. Its ability to offer high-performance semiconductor solutions suitable to the needs of AI data centers and cloud infrastructure providers is a meaningful advantage. Broadcom's success will hinge on the effective execution of its acquisition strategy and innovation in semiconductor and software solutions. Quarterly Highlights and Notable Developments Broadcom's performance in its fiscal 2025 first quarter, which ended Feb. 2, demonstrated substantial gains, primarily driven by AI and infrastructure software. Revenue from its AI segment soared by 77% to $4.1 billion. This growth highlights the expanding investment of hyperscalers in AI data centers, boosting the semiconductor solutions segment, which grew by 11% to $8.212 billion. The infrastructure software segment reported revenues grew 47% year over year to $6.7 billion, reflecting both strong demand and the successful integration of VMware. The operating margin of the VMware segment was also higher than expected, contributing to a robust adjusted EBITDA of $10.083 billion. That was equal to 67.6% of revenue, surpassing management's forecast of 66%. Broadcom's focus on strategic acquisitions continued with discussions regarding potential deals involving Intel's chip design units. This acquisition-led strategy remains crucial for enhancing market share and semiconductor capabilities. However, Broadcom faces risks associated with customer concentration and acquisition integrations. The company increased its dividend for the fourteenth consecutive year to a level of $0.59 per share per quarter, targeting $2.36 per share annually. This reflects management's ongoing confidence in Broadcom's business model. Looking Ahead Broadcom projects continued strength in the current quarter with expected revenue of around $14.9 billion, in line with its fiscal Q1 result, and an adjusted EBITDA margin of about 66%. Its growth momentum is largely attributable to AI-driven demand, with anticipated fiscal Q2 AI semiconductor revenues of $4.4 billion. Investor attention should remain on evolving customer relationships and the effective integration of new acquisitions. With talks of potential collaborations with Intel and ongoing innovation in semiconductor technology, Broadcom aims to fortify its position in high-growth areas. The company's focus on AI and infrastructure software will serve as pivotal elements of its growth strategy in the coming quarters.

Earnings Snapshot: Broadcom expects continued strength in AI semiconductor revenue of $4.4B in FQ2

More on Broadcom Broadcom Q1 Preview: Real Trade War Threats Broadcom: A Nice Opportunity Prior To Earnings Broadcom: I Was Wrong, But I'm Sticking To The Sidelines Ahead Of Earnings (Rating Upgrade) Broadcom pops as Q1 results and guidance suggest AI spending isn't slowing down Broadcom Non-GAAP EPS of $1.60 beats by $0.09, revenue of $14.92B beats by $330M

Mizuho TMT analysts say Broadcom is a must-own AI stock By Investing.com

Investing.com -- Mizuho analysts called Broadcom (NASDAQ:AVGO) a "must-own" AI stock in a note Friday, citing its strong earnings beat, growing AI revenue, and leadership in key semiconductor areas. The analysts believe Broadcom's latest earnings report and guidance make it the standout among AI semiconductor stocks, particularly compared to peers like Nvidia (NASDAQ:NVDA) and Marvell (NASDAQ:MRVL) Technology. "There is a lot to like from AVGO's quarter and conference call," Mizuho wrote, highlighting Broadcom's ability to "beat, raise, and see stock go up" at a time when other AI names have struggled. He pointed out that Broadcom avoided the weaker gross margin guidance that impacted Nvidia and does not face the same supply chain challenges that have plagued Marvell. One of Broadcom's key advantages is said to be its leadership in networking and custom silicon, two high-growth areas in AI infrastructure. "AVGO has both the R&D, reputation, and key customer relationships to sustain and grow their revenues and position in both key segments for many years to come. No one else can really touch them," Klein noted. The company also announced two new ASIC design wins that could enter production in 2027, adding to its existing $60-90 billion total addressable market target. BofA explains that these programs, along with increased spending from cloud hyperscalers on networking, position Broadcom for continued growth. Despite the broader tech sector's recent volatility, Mizuho argues that investors should look beyond the near-term market correction. "I would not overthink AVGO. It is a must own in my view if you can look past the near-term Tech correction and melt-down," he stated, adding that Broadcom's earnings potential could push its stock toward a $240-$250 range.

Broadcom 1Q Revenue Jumps as AI Semiconductor Momentum Continues

Broadcom logged a big jump in revenue for its fiscal first quarter, driven by its artificial-intelligence semiconductor and infrastructure software units, and guided for further growth in the current quarter. The Palo Alto, Calif., chip and software company on Thursday posted a net income for the three months ended Feb. 2 of $5.5 billion, or $1.14 a share, compared with $1.33 billion, or 28 cents a share, for the same period a year earlier. Analysts polled by FactSet had forecast per-share earnings of 86 cents. Stripping out one-time items, the earnings per share came in at $1.60, ahead of the $1.51 expected by Wall Street. Revenue rose 25% to $14.92 billion, beating analysts expectations of $14.62 billion, according to FactSet. Shares rose 8.7% to $195 in post-market trading. Through Thursday's close, shares are up 28% over the past 12 months. For the second quarter, the company expects revenue of around $14.9 billion. Wall Street had forecast revenue of $14.76 billion. "We expect continued strength in AI semiconductor revenue of $4.4 billion in the second quarter, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers," Chief Executive Hock Tan said. Write to Sabela Ojea at [email protected]; @sabelaojeaguix

Broadcom forecasts strong second quarter on upbeat AI chip demand

(Updates share movement in paragraph 1, adds executive comment in paragraph 4, background in paragraph 5) March 6 (Reuters) - Broadcom on Thursday forecast second-quarter revenue above Wall Street expectations on strong demand for its custom artificial intelligence chips from companies looking to process big data, sending its shares up more than 8% after the bell. The chipmaker expects revenue of around $14.90 billion, compared with estimates of $14.76 billion, according to data compiled by LSEG. Broadcom is seeing red hot demand for its custom artificial intelligence chips from companies looking for an alternative to the costly processors of market leader Nvidia as they rapidly expand their AI infrastructure. Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its AI semiconductors as hyperscale customers invest in custom AI chips for data centers. Though Broadcom faces intense competition from Nvidia's ethernet-like Infiniband products, it benefits from the expansion of AI data centers as one of the largest providers of advanced networking equipment. Analysts expect Broadcom to benefit further from large tech companies moving away from off-the-shelf chips to in-house processors as computing needs for AI tasks get more complex and personalized. Smaller rival Marvell Technology had also reported strong growth for its AI segment, but did not meet investors' lofty expectations. Broadcom reported revenue of $14.92 billion for the first quarter, beating estimates of $14.61 billion. AI revenue for the first quarter surged more than 77% to $4.1 billion, driven by strong adoption of its custom-made accelerators. Revenue in its infrastructure software segment rose more than 47% to $6.70 billion, while analysts expected $6.49 billion. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Arun Koyyur)

Broadcom jumps as upbeat forecast quells AI chip demand worries

(Reuters) - Broadcom's shares soared 12% in premarket trading on Friday as the chipmaker's strong revenue forecast helped restore some confidence in AI chip demand after a bruising sector-wide selloff following rival Marvell Technology's bleak outlook. "Given the anxiety about AI conditions in general, these results should come as a relief," according to Morgan Stanley analysts. Broadcom CEO Hock Tan said the company expects revenue of $4.4 billion in the second quarter for its artificial intelligence semiconductors as hyperscale customers invest in custom AI chips for data centers. Marvell's shares closed down 19.8% on Thursday, marking their worst day in more than two decades, after an in-line revenue forecast. Big Tech's push to diversify beyond Nvidia's pricey and supply-constrained AI processors has remained a tailwind for Broadcom. "Perhaps the AI trade isn't as dead as feared ... but amid AI nervousness, (Broadcom) management's view of the future is becoming even more positive," Bernstein analysts said. Reuters reported last month OpenAI was working with Broadcom to finalize its first custom chip design and reduce its reliance on Nvidia. Broadcom's shares more than doubled in 2024, but have declined about 23% so far this year. Peers Nvidia, Micron Technology, Advanced Micro Devices and Marvell rose between 0.4% and 1.7% in premarket trading on Friday. Broadcom has a 12-month forward price-to-earnings ratio of 26.58, compared with 23.46 for Nvidia and 24.50 for Marvell, according to data compiled by LSEG. (Reporting by Kanchana Chakravarty and Siddarth S in Bengaluru; Editing by Shounak Dasgupta)