Broadcom’s Sensible Positioning is Why I Am Loading Up Over and Over

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Broadcom holds a near-monopoly on high-speed AI Ethernet switching, amassing income no matter which hyperscaler wins the customized silicon race.
AVGO guides Q3 AI semiconductor income to $16 billion, a 200%+ year-over-year leap, whereas NVDA competes with the very clients Broadcom serves.
Hock Tan tasks over $100 billion in fiscal 2027 AI income, backed by a reserving backlog extending visibility via 2028.
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I hold hitting the purchase button on Broadcom (NASDAQ:AVGO) for a easy purpose: it’s the uncommon AI story the place the expansion is already booked, the money is already displaying up, and I should not have to guess which hyperscaler wins the compute race. That final half is the entire thesis. My cash retains touchdown right here as a result of Broadcom holds a near-monopoly on high-speed AI Ethernet switching whereas performing as the first beneficiary of hyperscalers transferring away from general-purpose GPUs towards customized silicon. When Google, Meta, OpenAI, and Anthropic every decide to their very own accelerators, Broadcom’s XPUs and switches sit on the invoice of supplies both manner.

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The Receipts Behind the Conviction

Q2 FY2026 income landed at $22.187 billion, up 47.9% 12 months over 12 months, with AI semiconductor income of $10.80 billion rising 143%. Non-GAAP EPS of $2.44 prolonged the beat streak to eight consecutive quarters. Free money circulate of $10.262 billion transformed at 46% of income, and adjusted EBITDA margin hit 69%. Money on the steadiness sheet greater than doubled 12 months over 12 months to $19.628 billion.

Then there may be the ahead e book. Q3 steering requires ~$29.40 billion in income, with AI semiconductor income guided to $16.00 billion, a 200%+ YoY leap. Q2 AI bookings got here in at over $30 billion in opposition to $10.8 billion shipped. Hock Tan stated “Our visibility now extends into 2028” and reiterated fiscal 2027 AI income in extra of $100 billion.

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The earnings piece retains me anchored. Broadcom has raised its dividend for 15 consecutive years since fiscal 2011, with the newest 10% increase to $0.65 per quarter. The yield sits at 0.6%, so this can be a dividend development story, not an earnings story. Ahead P/E of 23 in opposition to triple-digit AI development is the valuation I hold coming again to.

Why Not NVIDIA or Marvell

NVIDIA (NASDAQ:NVDA) is the reflexive AI decide. My cash goes to Broadcom as a substitute as a result of the hyperscaler diversification commerce is the entire level of my thesis. Networking alone made up virtually 40% of Q2 AI income, and Tan referred to as Broadcom “the de facto normal within the trade” in co-packaged optics. Marvell Expertise (NASDAQ:MRVL) performs in the identical customized silicon lane, however it doesn’t sit on partnerships overlaying 10 gigawatts in 2027 throughout Google, Meta, OpenAI, and Anthropic. Superior Micro Units (NASDAQ:AMD) is a compelling GPU alt, however it competes with the very clients Broadcom serves.

The Actual Threat

Buyer focus is actual. A handful of hyperscalers drive the AI quantity, and if any certainly one of them pulls again, the expansion curve bends. I additionally see the insider tape: 59 disposal transactions in opposition to 3 acquisitions within the final three months, with co-founder Henry Samueli main the promoting. What retains me shopping for anyway is the reserving backlog. Orders positioned as we speak for 2027 and 2028 supply are tougher to unwind than a quarterly sentiment shift, and the $56 billion full-year 2026 AI goal is already largely contracted.

Why the Purchase Button Stays Lively

Analysts carry 44 Purchase rankings in opposition to 0 Sells with a goal of $527.88 versus the $427.76 shut. That’s the market’s math. Mine is less complicated: Broadcom will get paid whether or not the profitable AI chip is designed in Santa Clara, Mountain View, or Menlo Park, and it palms me a rising dividend whereas I look ahead to 2028 to reach.

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