Broadcom Stock Split Update: Up 3% Since June, History Says AI Stock Will Do It Next

According to the company’s data, since 1980, companies have seen an average share price increase of 25.4% in the year after announcing a stock split. Bank of America. We can apply this statistic to Broadcom (AVGO -2.92%) to guess what future educational outcomes will be.

Broadcom, in particular, announced a 10-to-1 stock split after market close on June 12. The company’s share price rose 3% from the market open the next day, leaving the suggested upside at around 22% through June 2025.

Of course, past performance is never a guarantee of future profits. Whether Broadcom stock prices go higher or lower in the coming months depends on the company’s financial performance and investors’ valuation of the company’s shares. So let’s take a closer look at what Broadcom does and what Wall Street expects from the company. Here’s what investors need to know.

Broadcom is a leader in networking chips and custom silicon

Broadcom divides its business into two segments: semiconductor solutions and infrastructure software. The company generates semiconductor revenues across multiple end markets, including wireless devices, data center networking equipment and storage systems. Broadcom also designs application-specific integrated circuits (ASICs). The term refers to custom-made silicon, such as custom artificial intelligence (AI) accelerators.

Similarly, Broadcom generates software revenues in several end markets, including cybersecurity and mainframe software. The first includes solutions for endpoint, network and identity security, the second includes solutions for observability, data management and workflow automation. Additionally, Broadcom’s recent acquisition of VMware added virtualization software to its portfolio.

Broadcom is a leader in several markets, including ASIC and networking chip markets, as well as mainframe computers and virtualization software. However, its strong presence in certain semiconductor industries is particularly important because demand for AI infrastructure is expected to be a major catalyst. For example, JPMorgan Analysts estimate that Broadcom has an 80% share of Ethernet switch chips, and the market is expected to grow at 20-30% annually over the next few years.

Additionally, according to Barron’s, Broadcom dominates the high-end ASIC market with a 55-60% market share. The company helped AlphabetGoogle has been developing custom machine learning chips called Tensor Processing Units (TPUs) since 2013, which has helped Metaplatforms from 2020, build custom AI chips called Meta Training and Inference Accelerators (MTIA).

However, sales of custom AI chips are expected to grow faster in the coming quarters as Broadcom recently added three new customers. One of them is still unknown, but JPMorgan analysts identified the others as TikTok’s parent – ByteDance and OpenAI. This bodes well for the company and its shareholders. According to Grand View Research, sales of AI accelerators are expected to grow by 29% annually until 2030.

Note that Broadcom has a strong presence in several fast-growing markets such as AI chips and virtualization software, but it also competes in several slow-growing markets with its non-AI chips and mainframe software. As a result, Broadcom is growing slower than other AI chipmakers. Total revenue grew 47% last quarter, but that number drops to 4% when VMware’s contribution is excluded.

Broadcom stock is trading at a reasonable valuation

Wall Street is generally bullish on Broadcom. The company’s stock has an average price target of $195 per share, representing a 13% upside from the current share price of $172. Goldman Sachs analysts recently wrote: “Together Nvidiawe see Broadcom as a key part of the ongoing expansion of AI infrastructure.” Bank of America analysts echoed that sentiment, adding that Broadcom could sell VMware to enterprise customers running AI workloads.

Going forward, Wall Street expects Broadcom’s earnings to grow 22% annually through 2025. That makes the current valuation of 38 times earnings seem fair. Broadcom is a good choice for patient investors looking for reasonably priced semiconductor stocks that should benefit as demand for artificial intelligence infrastructure grows in the coming years. As always, it would be wise to start small and build up over time.