Broadcom, Marvell, Amazon and Apple

Chicago, IL – December 16, 2024 – Today, Zacks Investment Ideas highlights Broadcom AVGO, Marvell MRVL, Amazon AMZN and Apple AAPL.

Broadcomone of America’s leading semiconductor companies, reported fourth-quarter results on Thursday afternoon, beating analysts’ profit estimates by 2%.

Broadcom reported record fiscal 2024 revenue of $51.6 billion, up 44% year-over-year, driven by a 220% increase in AI-related revenue to $12.2 billion and strong performance in the semiconductor and infrastructure software segments. Adjusted EBITDA increased 37% to $31.9 billion and free cash flow reached $21.9 billion. In response to its strong financial performance, Broadcom announced an 11% increase in its quarterly dividend to $0.59 per share for fiscal year 2025, marking the fourteenth consecutive annual dividend increase since 2011.

Broadcom shares have been on a tear this year, rising 95% and breaking out to an all-time high following the Banner report. The company currently has one Zacks Rank #3 (Hold) rating, but it wouldn’t surprise me if analysts started raising their earnings estimates after seeing such promising results. Investment in AI infrastructure continues to be a driving force in this stock market and economy, and AVGO is playing an increasingly important role in the complex technology stack.

For most of this week I’ve been writing about developments in custom silicon, as this seems to be the next big thing in AI and this Broadcom report confirmed it. It was last week Marvellwhich hit new highs due to a strong quarter in custom AI sales and a new contract Amazon. Now, showing how quickly this niche industry is growing, Broadcom has just struck a deal with him Apple to develop tailor-made AI solutions for their new expansion in the server area.

The rise of artificial intelligence has led to a surge in demand for custom chips, known as application-specific integrated circuits (ASICs), tailored to optimize specific AI workloads. Companies like Marvell and Broadcom are joining industry leaders like Nvidia to develop dedicated solutions to meet these needs. Highly efficient, cost-effective and compact, these custom chips offer significant advantages over general-purpose chips for targeted AI applications, although they lack flexibility for broader tasks.

Broadcom’s impressive quarterly results and optimistic forecasts have sparked a rally in its stock, catapulting it to an all-time high with a daily gain of over 22%. This breakthrough follows months of consolidation as investors waited for a catalyst that would confirm the company’s growth potential. Robust AI revenue growth and growing role in custom silicon markets ensured just that.

Despite the drastic move, Broadcom’s long-term prospects remain extremely compelling. With forecast earnings growth of 16.5% per year over the next three to five years, the company is well positioned to benefit from increasing investments in AI infrastructure and custom chip solutions. This quarter’s results confirm Broadcom’s ability to capitalize on these trends and solidify its role as a key player in the rapidly evolving and extremely complex semiconductor landscape.

Broadcom’s strong performance and robust outlook make it an attractive stock for investors looking to participate in the AI revolution.

However, with the stock up over 22% in a single session and trading at all-time highs, potential buyers might consider waiting for a decline to build a position. Long-term investors confident in Broadcom’s leadership in custom AI chips and infrastructure may find opportunities to acquire shares over time as the company is well-positioned to capitalize on sustained growth in AI and data-centric technologies to benefit.

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