• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Broadcom A Longterm Winner

Tech Letter

The chip trade isn’t in the dumps, but traders are taking a fine tooth comb to earnings guidance to see if the numbers are stacking up with the hype.

Today we got yet another data point that suggests chip stocks are great, but they aren’t living up to the lofty expectations of growth that tech companies are used to.

In short, they are too expensive and investors want a cheaper multiple for chip stocks right here and now.

So be prepared for a little bit of a selloff in the immediate short term.

One of the best second-tier chip stocks and one of Apple's biggest customers gave us a glimpse into operations behind the scenes at one of Silicon Valley’s robust silicon makers.

Broadcom (AVGO) delivered a disappointing sales forecast, hurt by the parts of its business that aren’t tied to artificial intelligence.

The company projected sales of roughly $14 billion in the fourth quarter while they expect $12 billion of revenue from AI-related products for the full year, beating the average estimate of $11.8 billion.

The forecast showed that Broadcom’s non-AI operations are growing more slowly than anticipated. Though the company has benefited from a surge in artificial intelligence spending, not all of its wide-ranging divisions are significantly profiting.

The AI spending boom has turned Broadcom’s rival Nvidia (NVDA) into the richest, most valuable company in the industry. Nvidia sells so-called AI accelerators that help develop tools such as ChatGPT. Broadcom has benefited as well by supplying related components and software.

Datacenter providers rely on Broadcom’s custom-chip design and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones, and internet access gear. Its push into software, meanwhile, includes products for mainframe computers, cybersecurity, and data center optimization.

Over the long term, the AVGOs CEO believes that the AI chip market will move to custom, in-house designs. That would mean shifting away from Nvidia components — a change that could benefit Broadcom since it helps customers produce their chips.

Apple is a top customer as well: Broadcom provides key components for the iPhone.

Chip stocks were hovering at an all-time high just a few weeks ago.

The scandal that spurred a selloff in chips was the accounting issues at SuperMicro.

The initial event opened up a can of worms and signaled to traders to take profits while conditions were still favorable.

Now chip stocks are telling traders that they cannot keep up with the high expectations and investors will need to taper back the whole idea that AI is about to overtake the world.

Even if AVGOs AI business is doing exceptionally well, they have a legacy business that is bringing up the rear and could be a drag on the overall business for years to come.

AVGO is still a stalwart in the chip business with interests in the right verticals and I do believe it is still a long-term buy especially considering they still haven’t successfully integrated VMware.

 

 

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 april@madhedgefundtrader.com https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png april@madhedgefundtrader.com2024-09-06 14:02:542024-09-06 16:00:08Broadcom A Longterm Winner

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: September 6, 2024 Link to: September 6, 2024 September 6, 2024 Link to: September 6, 2024 Link to: September 6, 2024 September 6, 2024
Scroll to top