As Broadcom (AVGO) prepares to report earnings next week, Bernstein managing director and senior analyst Stacy Rasgon joins Market Domination to discuss his bull case on the company.
Rasgon explains that Broadcom has several different business segments, from semiconductors and software to infrastructure. “They also have what I would call the second-best AI story in the space I think after Nvidia,” he adds. He breaks down how Broadcom partners with tech giants like Google (GOOG, GOOGL) and Meta (META), who are making and scaling their own chips.
He adds, “[AI] networking, frankly, is just as important as the compute. And they’re the 800-pound gorilla there.” He explains that Broadcom’s current guidance for its AI revenues this year is more than $10 billion, about a third of its overall semiconductor business.
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This post was written by Melanie Riehl
Video Transcript
Let’s switch gears.
Um for our final question too because I wanna ask about Broadcom, which is reporting next week.
You recently came out with a note and said you like it for people who aren’t as familiar with Broadcom.
Where does it sort of fit into this whole new A I universe and why you bullish on it?
Yeah, you bet.
So Broadcom does a lot of things.
They have a semiconductor business, they have a software business, they do a lot of infrastructure work.
They also have what I would call the second best A I story in the space I think after, after NVIDIA, um you know, one of the, the, the, the, the competing factors to NVIDIA is actually like the large hyper scalar, like the Googles and the metas of the world are actually doing their own chips and in most cases, they rely on other outside partners to help them do that.
And Broadcom is one of those partners, Broadcom does the A I chips for Google, Google calls them TP US.
They’ve been working with Google for eight or nine years.
They’re working with meta as well.
They’re working with some third customer that they just disclosed recently.
Um They also do A I networking um Ethernet for, for large language models and, and generative A I and networking frankly is just as important as the compute and they’re the 800 gorilla there.
And their current guidance for their A I revenues this year is, is more than $10 billion out of a $30 billion semiconductor um uh out that they’re looking for this year.
So it’s like a third of their semiconductor business.
Um, they’re looking at to be quote unquote A I related this year.
And again, what we’ve seen from everybody in A I, it’s one of the few end markets is doing really, really well.
Um All of these folks have been seeing upward biases to their number that 10 billion feels fairly conservative to me, but it’s, it’s what I would call, like I said, the second best A I story in the space after NVIDIA.
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