When you look at stocks with some of the strongest potentials in the coming years, Ample(NASDAQ: AVGO) The list is achieved. The chip maker has been trapped in the recent market sale, which dropped around 20% by 2025 from this writing. However, the shares continue to increase more than 45% last year.
Let’s see why BroadCOM shares could be doubled, or more, for the next three years.
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Broad Comra in two segments: Semiconductors’ solutions and infrastructure software.
Originally focused on hardware, the company entered the software business through various acquisitions in recent years, including CA, Symantec technologies and more recently VMWare. With Ca Technologies, the company acquired a large portfolio of Mainframe and Enterprise software solutions, while Symantec brought a business security business.
The largest acquisition, however, was VMWARE, which acquired $ 2023 for $ 69 billion in November. VMWARE is a market leader in cloud virtualization and computer science solutions. Its basic virtualization product allows several virtual machines to run on a single server, helping to save customer costs. In the meantime, its VMWare Cloud Foundation (VCF) platform helps customers to create hybrid and multicloud environments where they can handle workloads through public clouds and their own premise data centers.
Broadcom has set out to transform VMWARE to rationalizing their product operations and solutions, while passing through perpetual licensing customers to a subscription model. At the end of the first fiscal quarter, 60% of its customers had passed to a subscription model. In the process, it has also been raising customers from their calculation virtualization product, VSPHERE, to its VCF platform.
As a result, Broadcoming Software Infrastructure Revenue increased by 47% to $ 6.7 billion last quarter, and provided that the segment was growing 23% in the first fiscal quarter. Their software companies should be a solid contributor, especially when business customers begin to resort to hybrid cloud environments Artificial intelligence (AI) Work loads.
Next to hardware, Broadcom makes components for various markets, including wireless devices, broadband Internet and automotive. However, their two most important businesses are the network and the ASICs (integrated circuits specific for applications).
Within his network business, Broadcom makes components such as Ethernet switches, optical receptors, digital signal processors (DSPs) and network interface cards (NIC). These components are critical parts of AI infrastructure.
Ethernet switches allow AI chips to quickly exchange massive amounts of data, while optical receptors and DSPs work together to send data to longer distances. Nics, meanwhile, helps to connect servers to a network. As a whole, these components are essential for managing data flow and distributing AI workloads between servers and ensuring that better high -performance computer resources are used.
As WIP AI clusters grow in size and complexity, these components are even more important for helping to maintain performance and efficiency.
Given the increasing size of the AI chip clusters, the Broad Companion business has strong growth prospects. However, the ASICS Broad Company represents its biggest opportunity. With this business, BroadCOM helps customers create their own personalized AI chips designed for specific tasks.
Personalized AI chips have better performance and consume less power than mass market Graphic Processing Units (GPU) since Nvidiawhich are the primary chips that are used to train ai models and make inferences. The disadvantage is that there are many early costs and time is needed to design a personalized chip. These chips are also less flexible than GPUs, which can be programmed for various tasks.
However, with the cost of decreasing NVIDIA GPU, more companies have been resorting to Broadcom to help them design personalized AI chips. Although personalized chips require significant costs ahead, their reduced energy consumption can lead to a lower global property cost over time.
Broadcom’s first personalized chip client was Alphabetfor which he helped design the tension processing unit (TPU). These chips were specifically developed to optimize AI workloads within the Google Cloud Google Tensorflow frame and have been very successful in optimizing AI workloads and reducing costs.
Broadcom’s success with Alphabet has led to a large number of new custom clients from AI chip. The company sees that its three AI clients farthest in their development have a market opportunity of 60,000 to 90 billion dollars in their 2027 financial year (end of October 2027). In the meantime, he added several custom chip customers along the way, including Apple. Although Broadcom will not capture all this market opportunity, it should lead to very strong growth in the coming years.
Image Source: Getty Images
Broadcom generated revenue of $ 51.6 billion in 2024 financial year, so if he could capture a good piece of his personalized chip opportunity (for example, $ 40 million in additional income) and continue to grow VMWARE, he might grow his income to exceed $ 100 billion in tax 2027.
We suppose some added expenses and round out their 2027 tax EPS to $ 14.50. With Apple and other customers who probably reach 2028, we assume that there is a growth of income more than $ 15 billion and we add $ 2.25 more to the EPS in the 2028 exercise, contributing to $ 16.75.
At a price of 25 times (p/e) multiple at the end of $ 2027 in $ 16.75 in 2028 EPS financial year, the action would be worth more than $ 400 in three years. Currently, actions are listed on a P/E 28 times, so multiple seem appropriate.
As such, Broadcom’s actions seem to have a good opportunity of more than double in the coming years helped by an increase in personalized chip and network income and continuous VMWare growth.
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Suzanne Frey, an Alphabet executive, is a member of the Board of Directors of the Motley Fool. Geoffrey Seiler has positions in alphabet. The Motley Fool has positions and recommends Alphabet, Apple and Nvidia. The Motley Fool recommends Broadcom. The mold’s fool has a Outreach policy.
