This Super Semiconductor Stock Is Up 200% in 2 Years, But Is the $1 Trillion Giant Still a Buy?

Core Viewpoint - Broadcom is rapidly establishing itself as a leading supplier of AI hardware for data centers, significantly contributing to its stock performance and market capitalization growth [2][4]. Company Overview - Broadcom has a long history in the semiconductor industry, evolving significantly after merging with Avago Technologies in 2016 and investing nearly $100 billion in acquisitions [4]. - The company is now focusing on AI hardware, helping hyperscale customers design and manufacture custom AI accelerators, reducing reliance on major suppliers like Nvidia [5]. AI Market Opportunity - Broadcom's hyperscale customers are projected to deploy 1 million AI accelerators each by 2027, indicating a serviceable addressable market of up to $90 billion [6]. - The demand for AI networking equipment is also surging, with a 70% increase in AI networking revenue due to high demand for data center switches and routers [10]. Financial Performance - In fiscal Q2 2025, Broadcom reported total revenue of $15 billion, a 20% increase year-over-year, with AI revenue growing by 46% to $4.4 billion [9]. - The company's net income surged by 134% year-over-year to $4.9 billion, while adjusted EBITDA rose by 34% to $10 billion [10][11]. Valuation Metrics - Broadcom's stock is currently trading at a P/E ratio of 91.6, significantly higher than the Nasdaq-100 index's P/E ratio of 30.6 [13]. - The price-to-sales ratio stands at 20.5, more than double its 10-year average of 8, indicating a high valuation relative to historical performance [14]. Investment Outlook - Short-term investors may find Broadcom's stock expensive, potentially limiting upside in the next 12 months [16]. - Long-term investors could benefit if spending on AI accelerators and networking equipment continues to grow, particularly if it reaches the projected $90 billion by 2027 [16][17].