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Broadcom's AI Future: Shrinking Iceberg or Solid Ground?
19 Feb
Summary
- Analyst warns Broadcom may be on a shrinking iceberg due to AI ASIC competition.
- Broadcom's Q4 FY2025 revenue hit $18.02 billion, with AI chip sales soaring.
- Stock shows past gains but faces pressure from hyperscalers internalizing AI.
Hyperscalers are significantly increasing capital investment in data centers and advanced computing, fueling a fierce race in the AI sector.
D.A. Davidson initiated coverage on Broadcom (AVGO), with analyst Gil Luria suggesting the company might be on a "shrinking iceberg." This assessment stems from the growing trend of hyperscalers favoring customized accelerators and potentially internalizing more of the AI stack.
While Broadcom reported impressive fourth-quarter fiscal 2025 results, with revenue reaching $18.02 billion and AI chip sales surging 74% to $8.2 billion, the firm noted margin pressure concerns if key customers design more tooling and silicon in-house.
Consequently, D.A. Davidson assigned Broadcom a "Neutral" rating, arguing its AI ASIC exposure doesn't warrant a premium multiple compared to leaders like NVIDIA.
Despite a recent 2.55% slip over three months, Broadcom's stock has advanced 9% in six months and 43.28% over the past 52 weeks, indicating prior strong momentum. The company, headquartered in Palo Alto, California, is a global technology firm valued at approximately $1.5 trillion, specializing in semiconductors and enterprise software.
