As Broadcom Shares Slide, Is AVGO Stock a Buy on the Dip?

Core Viewpoint - Broadcom's stock has experienced a 20% decline from its 52-week high, primarily due to concerns over profitability and gross margins, despite strong demand for its AI-focused semiconductor products and infrastructure software solutions [1][2][9] Group 1: Financial Performance - Broadcom's stock has dropped from a high of $414.61, reflecting market concerns about profitability rather than a decrease in demand [1][9] - Management has projected a decline of 100 basis points in consolidated gross margin for the first quarter, attributed to a higher mix of lower-margin AI-related revenue [2] - As AI revenue grows, overall gross margins may remain under pressure throughout the fiscal year, influenced by the balance between infrastructure software and semiconductor sales [3] Group 2: Strategic Focus - The company is focusing on improving operating leverage, expecting that higher revenue volumes will lead to stronger operating profit dollars, even with declining gross margin percentages [6] - Broadcom anticipates shipping more AI systems in the second half of the fiscal year, which will involve passing through additional component costs from third parties [7] - Despite potential further declines in gross margin percentages due to third-party costs, the company expects total gross margin dollars to rise and operating profit dollars to increase due to leverage [8]