Is Broadcom (AVGO) Still Undervalued?

Harvard’s Stake: $146,681,741

Broadcom (NASDAQ:AVGO) is up astir 48% implicit the past year, yet bulls judge determination is inactive meaningful upside ahead. The halfway crushed is simple: the customized AI spot manufacture is booming arsenic hyperscalers question lower-cost, purpose-built alternatives to off-the-shelf GPUs — and Broadcom dominates this space. CEO Hock Tan stated earlier this twelvemonth that the institution has wide visibility to AI gross from chips unsocial exceeding $100 cardinal successful 2027, providing a uncommon and factual semipermanent anchor for investors.

What makes Broadcom’s (NASDAQ:AVGO) presumption peculiarly defensible is its web of locked-in, multi-year hyperscaler partnerships. Meta extended its concern done 2029 to co-develop aggregate generations of its customized AI grooming and inference chips utilizing Broadcom’s 2nm-class technology. Google extended its TPU improvement and proviso statement done 2031, guaranteeing Broadcom a five-year committed deployment runway.

Broadcom (NASDAQ:AVGO) is besides collaborating with Anthropic connected a 4.5GW compute capableness woody and with OpenAI connected a monolithic 10GW customized inference motor — though some relationships impact analyzable financing arrangements that the marketplace is watching closely. Combined, these partnerships person pushed Broadcom’s AI bid publication to $73 billion, with its full firm backlog approaching $162 billion.

However, the valuation is becoming progressively hard to justify. Broadcom’s (NASDAQ:AVGO) non-GAAP P/E stands astatine 61x — importantly higher than different high-growth spot players similar Nvidia (36x) and Micron (44x). This is harder to support fixed that Broadcom’s 3-year gross CAGR of 25.66% and nett income CAGR of 24.96% airy successful examination to Nvidia’s maturation trajectory. The banal is efficaciously priced for perfection, meaning immoderate stumble connected net oregon a walk-back of the $100 cardinal 2027 people could trigger a crisp rerating.

Carillon Eagle Growth & Income Fund stated the pursuing regarding Broadcom Inc. (NASDAQ:AVGO) successful its Q1 2026 capitalist letter:

“Broadcom Inc. (NASDAQ:AVGO) was anemic for the 4th arsenic higher ostentation led investors to fearfulness a slowdown successful hyperscaler spending. This led to little spending connected customized silicon, the main crushed for Broadcom’s spot implicit the past mates of years. We judge Broadcom inactive has immoderate of the champion tech successful the abstraction and volition beryllium 1 of the biggest winners from AI (Click Here to Read the Letter successful Detail).”