Broadcom stock price continued its strong surge and is hovering at its all-time high as investors cheer its positioning in the artificial intelligence space. AVGO crossed the important resistance at $300 for the first time, pushing its market capitalization to over $1.42 billion.
AI tailwinds are continuing
Broadcom’s stock price has been in a strong bull run this year, as signs show that AI spending is continuing.
For example, Palantir Technologies published strong results that showed robust demand for its AIP solution, which helps companies and government agencies build artificial intelligence solutions.
Similarly, the top hyperscalers like Microsoft, Meta Platforms, and Amazon continued spending huge sums of money in AI infrastructure. Analysts anticipate that these companies will spend over $3 trillion in the AI space in the next few years.
This spending will benefit Broadcom, a company that provides solutions to these companies. It provides them with custom silicon, networking chips, peripheral component interconnect express (PCIe), and optical interconnects.
The most recent results showed that NVIDIA’s AI growth was accelerating. Its AI revenue jumped by 77% in the second quarter to $4.1 billion, while the infrastructure software jumped by 47% to $6.7 billion.
The management noted that the AI semiconductor revenue was $4.4 billion, which it attributed to hyperscale partner spending. Hock Tan, the CEO 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.”
Growth to accelerate
Broadcom’s revenue jumped by 25% in the second quarter to $14 billion, with its semiconductor and infrastructure software growing to $8.2 billion and $6.7 billion, respectively.
Analysts are optimistic that Broadcom’s revenue will continue growing this year. The average estimate is that its Q2 revenue will be $15.8 billion, 21% higher than what it made last year.
Broadcom will make $62 billion in annual revenue this year and $75 billion next year. These estimates assume that the company will not make major acquisitions as it has done in the past.
Broadcom has also become highly profitable, with its annual earnings per share (EPS) expected to be $6.67, up from $4.87 last year. It is expected to jump to $8.82 in the following year.
A key concern among Broadcom analysts is that it is one of the most overvalued companies in the United States. It has a price-to-earnings ratio of 65, much higher than the sector median of 29. Most notably, it is more overvalued than the faster-growing NVIDIA.
Broadcom stock price technical analysis
The daily chart shows that the AVGO stock price has been in a strong bull run this year. It recently moved above the important resistance level at $248.5, the upper side of the cup-and-handle pattern.
The stock also jumped above the key resistance level at $265.17, invalidating a small double-top pattern. It remains above all moving averages, a sign that bulls are in control.
However, AVGO stock price has formed a bearish divergence pattern as the Relative Strength Index (RSI) and the MACD indicators have continued falling. Therefore, there is a likelihood that the Broadcom share price will pull back and possibly retest the support at $250.
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