Will Broadcom Be Worth More Than Apple by 2040?

Group 1: Company Overview - Broadcom's stock has increased approximately 1,900% over the past decade, showcasing its robust growth and strategic acquisitions [1] - The company has a market capitalization of $650 billion, making it one of the most valuable chipmakers globally, yet it remains significantly smaller than its largest customer, Apple, which has a market cap of $2.9 trillion [1] Group 2: Growth Strategy - Broadcom has expanded its portfolio through numerous acquisitions, including CA Technologies, Symantec's enterprise security division, and VMware, aiming to diversify its revenue sources beyond semiconductors [2] - The semiconductor business accounted for 79% of Broadcom's revenue in fiscal 2023, with plans to reduce this to approximately 50% post-VMware acquisition [2] Group 3: Financial Performance - From fiscal 2016 to fiscal 2023, Broadcom's adjusted revenue grew at a compound annual growth rate (CAGR) of 15%, with adjusted gross margin increasing from 60.5% to 74.7% and adjusted earnings per share (EPS) rising at a CAGR of 21% [3] - Analysts project revenue and adjusted EPS growth of 41% and 11%, respectively, for fiscal 2024, followed by 14% and 22% growth in fiscal 2025 [3] Group 4: Market Position and Valuation - Broadcom's valuation is currently at 30 times forward earnings, influenced by strong demand for AI chips, which saw sales quadruple year-over-year to $2.3 billion in Q1 of fiscal 2024 [4] - AI chip sales are expected to account for 35% of Broadcom's total semiconductor revenue for the full year [4] Group 5: Future Outlook - While Broadcom's growth potential is significant, it is unlikely to surpass Apple in market capitalization by 2040, as Apple's stock would only need to increase by less than 50% to maintain its lead [6][7] - Broadcom could see substantial gains from its current levels as it continues to expand its semiconductor and software businesses, but careful monitoring of its expansion strategies is essential to avoid margin erosion or excessive debt [7]