r/valueinvesting
Why I am buying more Broadcom (AVGO)
Author plans to double AVGO position, arguing AI chip revenue will exceed $100B 2027 guidance based on custom silicon GW orders.
- AI chip revenue for 2027 is guaranteed to exceed the $100B baseline, potentially reaching $150B based on 10 GW shipments.
- Advanced node chips (3nm/2nm) will yield higher revenue per GW, making the $10B/GW floor overly conservative.
- Potential bullish catalyst from Apple's deeper hardware and silicon infrastructure upgrades under new leadership.
- Recent earnings missed revenue expectations and software sales were soft, causing a post-earnings sell-off.
- Management did not raise the 2027 AI chip sales guidance above the existing $100B+ framework, disappointing the market.
- The investment quality and business visibility are considered lower compared to direct peers like TSMC.
Just to preface, I own roughly 12 shares of Broadcom at an average price of $330 (my #1 position in portfolio roughly $43K). I will be doubling my position as the stock dips during wave of rotations into value. As a 20M, this is a substantial investment. I can also admit that my investment in TSMC have stronger thesis because of visibility and positioning, I don't think Broadcom can have the same "quality" of investment. This is for you to consider my potential bias, and I would love to hear your disagreements that could prevent me from painful loss.
Earning Call, I can admit that missing revenue was disappointing, but soft software sales is really not why people invest in Broadcom. I attribute the post-sell off to the reason that they did not raise guidance of AI chip sales for 2027 from the existing $100B+ framework. My personal read is that it develop from earlier this year, we expect $100B to now it guaranteed excess of $100B.
This is from Q1 FY2026 earning call breakdown, three GWs from Anthropic, one GW from OpenAI, at least 2 GWs from Meta, at least 3 GWs from Google, plus small orders. CEO Hock Tan confirmed that in 2027, Broadcom is shipping roughly 10 GWs. At roughly $20B per GW range that Broadcom CEO say is "not far off", let just be conservative at $15B per GW. It would be roughly $150B almost 50% higher than our baseline of $100B right now. The $100B floor is assuming $10B per GW which is the absolute floor that almost senseless, because newer generation chips that will be developed utilizes 3nm or advanced nodes (>2nm) from TSMC comes with higher revenue per GW not less.
This is why I can't careless how the market react or rotate, I think the banks and Morningstar raised their price target and fair value based on a thesis that similar to mine. Another bullish catalyst could be Apple under Ternus, as they are likely to make harder hardware push to solve AI through deeper hardware, silicon, and infrastructure upgrades. This is not something I would rely on for the base case, but I would say if there was a deal it would be quite bullish.
Please let me know how you think, I would love to hear bullish and bearish perspectives.
Broadcom's price had a massive beat baked in. They didn't deliver. Still overvalued, not a value stock. Dell for example beat revenue and earnings by huge margins, proved their recent acquisition is paying off massively, 757% increase in AI server business growth, and the stock dropped off a cliff after initial euphoria. Hewlett-packard beat their 2027 estimate in 2026 and raised guidance enormously, stock dropped off a cliff immediately after gapping up. Broadcom also has the unfortunate position of being extremely exposed to how OpenAI is doing which is a huge structural weakness that people are beginning to price in. When you have one of the biggest stocks in the S&P500 (Broadcom) dumping 20% with zero resistance on the way down, that's an extremely bad sign. The S&P has enormous buying support.
There is not “enormous buying support” over 2 days due to it being in the S&P dude. Get real.
I want to address your comment in two points. First, OpenAI is definitely the "riskiest" customer for sure stemming from weak financials and volatile activities. I would argue that AMD is much more at risk in this argument roughly 40% exposure compared to 5-8% (Broadcom). Almost every customers have medium-strong financials.
You cannot value Broadcom’s AI ramp the same way you would value Dell or HP server revenue, because server assembly is cyclical, competitive, and lower-moat, while Broadcom’s custom ASIC business is much stickier. Once a hyperscaler commits to a custom accelerator platform, the switching costs are high: the chip roadmap, software stack, networking architecture, packaging, supply chain, and power/thermal design all become deeply integrated. Not to mention networking components and software.
Let me know if you disagree
Both good points, it's another reason I won't touch AMD or Oracle personally. And good to point out the cyclicality of server revenue
The other guy in the comments thinks Dell... Fucking DELL, Trump's Fleshlight, is a value investment opportunity but Broadcom isn't. You're wasting your time explaining to these people.
Irrc Broadcom went on an acquisition spree, and one of the notable ones was VMWare. They tried to milk VMWare as much possible from the customers by changing the license scheme and hiking the price multiple folds. I am in the IT financial industry and work closely with IT vendors. Many of these VMWare customers are now or have already moved out of VMWare because of the unethical price hike previously. Broadcom basically destroyed VMWare and forcing customers to switch out of the software.
That's Broadcom's SOP: acquire and then squeeze until the acquisition is a dry husk and withers away to nothing.
Beat the expectations or the analysts are just bad at guessing?
It’s completely silly to judge a company based on one quarter’s results. Our life is organized in years, not quarters. A full year’s results is much more meaningful.
30 p/e is overpriced for a company with slow growth, i wouldnt state that in Broadcom’s case
Forward is 20?
AVGO is the best long-term play. History speaks for itself.
Trademates shows AVGO as a HIGH-GROWTH but PRICEY play: P/E 63x with 32% revenue growth and insane 39% net margins. The -7.9% drop is from semiconductor sector panic, not company-specific bad news. Catalyst is likely profit-taking after the AI hype cycle cooled. Action plan: I'd wait for $350-360 before averaging in. The analyst consensus is overwhelmingly bullish (52 buy/4 hold), but that P/E leaves zero room for error. DCA into this, don't YOLO.
r/systemadmins loves broadcom stock 😂
Loved it when they bought out VMware, fired all the staff then increased their prices by 100x. Classic broadcom
Healthy drop i’d say, luckly i have average of 260 and only buy small at dips