Up 500%, What’s Happening With AVGO Stock?

Core Insights - Broadcom Inc. has outperformed the broader market with a year-to-date increase of approximately 46%, compared to the S&P 500's 14% [2] - The stock has shown significant long-term growth, increasing over 500% since early 2023, driven by strong quarterly results and new AI-chip client acquisitions [3] Group 1: Valuation and Performance - The P/E ratio surged from 14 to 54 as the market re-evaluated Broadcom as an AI infrastructure growth entity, supported by a $10 billion deal with OpenAI and eleven consecutive quarters of AI revenue growth [4] - AI revenue for Q3 2025 reached $5.2 billion, marking a 63% year-over-year increase, justifying the elevated valuation [4] - Adjusted net income grew by 91.5%, from $16 billion to $31 billion, despite a 15% increase in outstanding shares due to the VMware acquisition [5] Group 2: Strategic Acquisitions and Market Position - Broadcom completed its $69 billion acquisition of VMware, adding a high-margin software division and maintaining strong operating margins of 39% and net margins of 32% [6] - The demand for custom AI chips is projected to generate $25-30 billion in revenue next year and exceed $40 billion by 2027, significantly expanding Broadcom's earnings base [6] Group 3: Share Count and Market Dynamics - The 15% rise in outstanding shares is linked to the financing of the VMware acquisition, which involved issuing new shares as part of the transaction [7] - Currently trading around $340 per share, Broadcom's P/E ratio of approximately 54x reflects a premium compared to traditional semiconductor companies and its own historical average of 30x [7][8]