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Tariff fears have ignited a market rout, sending shockwaves through every major index. The tech-driven Nasdaq 100 Index ($IUXX) has borne the brunt, plunging more than 7% in 2025, while semiconductor stocks are caught in a deep correction as recent AI investments have not met investor expectations.
Amid this turbulence, chip giant Broadcom (AVGO) is trading far below its recent highs, sparking heated debates among market watchers about whether this dip is a golden opportunity to buy.
Let’s break down the company’s performance to see if Broadcom’s recent decline indeed offers a compelling entry point for investors.
About Broadcom Stock
Based in San Jose, California, Broadcom (AVGO) specializes in designing and manufacturing high-quality semiconductor chips for devices such as computers, smartphones, and other electronics. Broadcom boasts a strong client base, including Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOG), supplying specialized chips for data centers and AI applications, enabling efficient cloud computing and high-volume processing. The company is roughly valued at $800 billion.
Broadcom has ramped up investments in advanced chip technologies and custom ASIC solutions designed for data-intensive workloads. This includes next-generation products built on a 3-nanometer process, which is expected to attract major hyperscale cloud providers. Analysts project that Broadcom’s serviceable addressable market for AI solutions could expand dramatically, potentially reaching between $60 billion and $90 billion by 2027.
After enjoying a stellar year in 2024, the chip leader faced a significant correction in 2025, down 26% year-to-date amid growing fears over massive spending in AI and a broader market downturn. However, the stock is still up 28% over the past year.
Broadcom Beats Q1 Earnings and Revenue
In the first quarter of its fiscal 2025, Broadcom delivered impressive financial results by reporting consolidated revenues of approximately $14.9 billion, a robust 25% year-over-year increase that beat consensus estimates by 2.23%. This strong top-line performance was driven by both its semiconductor and infrastructure software divisions. The infrastructure software segment saw significant benefits from the VMware acquisition. Notably, 70% of Broadcom’s top 10,000 customers have adopted VMware Cloud Foundation, driving a 47% YOY sales increase to approximately $6.7 billion.
The company’s AI-related revenue surged by an astounding 77% YOY, reaching $4.1 billion, underlining its accelerating presence in the AI market. CEO Hock Tan highlighted this momentum, stating, “We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers.”
Additionally, Broadcom’s consolidated adjusted EBITDA hit a record $10.1 billion, reflecting a 41% increase from last year, while the adjusted EBITDA margin expanded to 68%, surpassing the guidance of 66%. Non-GAAP EPS reached $1.60, surpassing analyst expectations of $1.51 and marking a 45% year-over-year growth.
The firm also reported a robust free cash flow of $6 billion and ended the quarter with approximately $9.3 billion in cash and cash equivalents, reinforcing its strong balance sheet and ability to invest in future growth initiatives.
Looking ahead, Broadcom has provided optimistic guidance for the second quarter of the fiscal year 2025, projecting consolidated revenues of approximately $14.9 billion.
Similarly, Analysts estimate full-year revenues to be around $60 billion, with EPS projected at approximately $2.10, indicating confidence in Broadcom’s sustained growth trajectory.
What do Analysts Think about Broadcom Stock
Wall Street analysts are highly optimistic about Broadcom’s growth prospects. The group of 33 analysts who have been tracking Broadcom stock has assigned a consensus "Strong Buy” rating, with 30 “Strong Buys” and three “Holds.” The analysts’ average 12-month price target of $251.17 suggests upside potential of nearly 50%.
The Bottom Line
Despite its recent slump, AVGO still trades at a significant premium based on its sales metrics. Its trailing price-sales ratio stands at 15.3x, approximately 418% above the sector median of 2.8x, while its forward P/S ratio of 12.7x remains nearly 386% higher. These elevated multiples not only surpass broader market averages, but also exceed AVGO’s five-year historical valuations by over 40%, raising concerns about potential overvaluation.
That said, Broadcom continues to benefit from strong macroeconomic tailwinds within the semiconductor industry. With the global semiconductor market reaching approximately $627 billion in 2024 and projected to approach $700 billion by 2025, driven largely by AI and cloud computing demand, the company remains well-positioned for long-term growth. While valuation concerns persist, Broadcom’s exposure to these high-growth segments could justify its premium in the years ahead.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
