Broadcom (NASDAQ: AVGO)
A Decade-Long Compounder That’s Just Getting Started
If there’s one stock we’d feel confident holding for the next decade, it’s Broadcom (AVGO) — and not because of hype, but because of the company’s exceptional execution across both hardware and software. Broadcom isn’t just participating in the AI buildout; it’s helping define it.
The company’s custom silicon business is on fire, supported by a record $110 billion backlog, roughly half of which is semiconductor-related. Its AI chip revenue soared 63% year over year to $5.2 billion in Q3, fueled by surging demand from major hyperscaler clients. On top of that, Broadcom recently inked a multiyear strategic partnership with OpenAI to co-develop and deploy 10 gigawatts of custom AI chips and Ethernet systems — a move that firmly cements its position as a key supplier in the AI infrastructure boom.
Meanwhile, Broadcom’s networking division continues to dominate with its Tomahawk switches and Jericho routers — critical hardware for scaling the next generation of data centers. These aren’t one-off sales; they’re tied to the ongoing expansion of AI clusters that require massive, interconnected systems of GPUs and accelerators. With the new Jericho4 launch in 2025, Broadcom is keeping pace with the escalating bandwidth demands of large-scale AI operations.
Beyond chips, the company’s infrastructure software business is quietly transforming Broadcom’s financial profile. Software now makes up 42% of total revenue, growing 17% year over year, with an astonishing 93% gross margin. The acquisition of VMware continues to pay off, especially with VMware Cloud Foundation 9.0 gaining traction among enterprise clients looking for secure, cost-effective alternatives to public cloud.
Financially, Broadcom is in rare form — $16 billion in quarterly revenue, a 65.5% operating margin, and $7 billion in free cash flow. It’s a mature business generating enormous cash and reinvesting in high-growth areas like AI infrastructure and software subscriptions.
At around $350 per share, Broadcom trades at about 36 times forward earnings — not cheap, but justified by consistent growth, strong margins, and decades-long tailwinds. Analysts expect revenue to climb from $52 billion in 2024 to $133 billion by 2028, with EPS tripling over the same period. That trajectory supports a potential share price near $535 within three years, implying roughly 56% upside from current levels.
Broadcom may not grab headlines like some of its peers, but it’s quietly become one of the most powerful compounders in tech — a stock that rewards patience, consistency, and conviction. For long-term investors, it’s hard to find a steadier hand in the AI era.
