We came across a bullish thesis on Broadcom Inc. (AVGO) on Sanjiv’s Substack. In this article, we will summarize the bulls’ thesis on AVGO. Broadcom Inc. (AVGO)’s share was trading at $246.93 as of 6th June. AVGO’s trailing and forward P/E were 90.05 and 37.88 respectively according to Yahoo Finance.
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Broadcom stands at the heart of AI infrastructure buildout, with surging demand for its custom XPUs and Ethernet-based networking solutions. The company expects at least three hyperscalers to deploy over one million AI-accelerated clusters each by 2027, with custom silicon playing a dominant role.
Volume shipments are already underway to three such customers, while four additional large tech firms are deeply engaged in development, potentially expanding Broadcom’s AI TAM beyond the current $60–90 billion estimate. Demand is increasingly inference-led, with Broadcom anticipating a steeper ramp in XPU orders through late 2025. Networking demand is also accelerating, especially in high-density scale-up configurations within data centers, where Broadcom’s new Tomahawk 6 switch, offering 102.4 Tbps throughput, is uniquely positioned.
AI aside, the VMware acquisition is proving accretive, with strong uptake of VCF (vSphere Cloud Foundation) enabling on-prem private AI deployments. Over 87% of Broadcom’s largest customers have adopted VCF, while ARR is growing in double digits.
Core enterprise software benefits from an open ecosystem and tight NVIDIA collaboration, as evidenced by uptake of the Private AI Foundation. Non-AI segments remain sluggish, though broadband and server storage saw sequential growth. Valuation is stretched: at ~$247, AVGO trades at ~30x forward earnings and ~29.6x forward FCF, yielding 3.3–3.4%. A DCF analysis with conservative assumptions implies a fair value of ~$208, suggesting a 15% premium.
Given high R&D intensity and strategic positioning in custom silicon and AI networking, Broadcom’s long-term prospects are strong, but its near-term upside appears limited.
Previously, we highlighted a bullish thesis on Broadcom (AVGO) by Daan Rijnberk on Substack in March 2025, which emphasized the company’s exceptional AI-driven growth, VMware integration, and industry-leading margins. The stock has appreciated by approximately 26% since our coverage. Sanjiv focuses on Broadcom’s custom silicon ramp, inference-led XPU demand, and expanding AI TAM via deep hyperscaler partnerships. While both agree on Broadcom’s centrality to the AI buildout, Rijnberk sees valuation as attractive post-pullback, whereas Sanjiv expresses near-term caution given the stock’s premium pricing.