Broadcom (AVGO, Financial), a key supplier of AI data center Ethernet switch chips and ASIC customized AI chips, has been a central focus in AI investment since 2023. However, its stock has recently underperformed compared to the Technology Select Sector SPDR Fund (XLK) and the Philadelphia Semiconductor Index (SOX), dropping over 15% from its peak. Analysts attribute this to investors reallocating funds from popular semiconductor stocks to SaaS software stocks, which are less hyped and still benefit from the AI boom.
Despite the stock dip, Broadcom's forward PEG ratio of 1.69 is attractive compared to the tech sector's median of 1.89. Wall Street remains optimistic, with a 12-month target price of $200, suggesting a 23% upside. Broadcom's dominance in customized AI chips and partnerships with tech giants like Google and Meta are expected to drive growth, even as competition with NVIDIA (NVDA) intensifies.
