The semiconductor industry is expected to grow roughly 30% toward its first $1 trillion in global sales in 2026, with AI semiconductor sales alone anticipated to expand by over 50% year-over-year (YOY). In that kind of setup, Broadcom (AVGO) stands out as an important name in custom AI chip design, mainly through its Application-Specific Integrated Circuit (ASIC) business that supplies hyperscalers like Alphabet’s (GOOGL) Google, Meta Platforms (META), and OpenAI.
On Jan. 14, Cathie Wood’s Ark Invest added 143,089 shares of Broadcom valued at approximately $50.74 million across its Ark Innovation (ARKK) and Ark Next Generation Internet (ARKW) exchange-traded funds (ETFs). The buy came after AVGO stock fell 4% that day, which fits Wood’s usual approach of stepping in when strong companies pull back.
The move also points to real confidence in Broadcom’s path as the AI infrastructure buildout continues, especially with demand rising for custom ASICs and networking chips.
With Wells Fargo now expecting Broadcom’s AI semiconductor revenue alone to hit $52.6 billion in 2026 and $93.4 billion in 2027, should investors follow Wood’s lead and double down on Broadcom stock? Let’s find out.
Broadcom is a diversified infrastructure company, combining a high-margin semiconductor business with a growing infrastructure software business that is built around long-term, mission-critical customer relationships.
Over the past 52 weeks, that mix has delivered a 37% gain, even though the stock is down almost 5% year-to-date (YTD). That movement shows how a strong longer-term run can still come with short-term pullbacks.
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Even so, the valuation is not cheap. Broadcom trades at about 39.3 times forward earnings, well above the sector’s forward multiple. Still, AVGO stock yields roughly 0.78%, with a forward payout ratio of 40.46%, a 15-year streak of dividend increases, and quarterly dividends now at 0.65 per share.
That shareholder return story is supported by strong results in the latest quarter. In the fourth quarter of 2025, revenue came in at $18.01 billion, up 28% YOY, with GAAP net income of $8.51 billion and non-GAAP net income of $9.71 billion. Adjusted EBITDA was $12.21 billion, equal to 68% of revenue. Meanwhile, GAAP diluted EPS was 1.74 and non-GAAP diluted EPS was 1.95, showing solid profitability even with VMware integration noise in the background.
Cash flow also stayed strong, with $7.7 billion from operations and $7.46 billion in free cash flow (41% of revenue) after $237 million in capex, giving Broadcom room to keep lifting dividends, fund AI-focused growth, and still protect balance sheet flexibility.
Broadcom’s newly launched unified Wi‑Fi 8 platform is a clear example of the firm’s progress. It pairs the BCM4918 accelerated processing unit with two dual‑band Wi‑Fi 8 devices, the BCM6714 and BCM6719, to deliver higher throughput along with “smart intelligence,” built‑in security, and better power efficiency. This matters because home connectivity is moving beyond faster streaming and toward real‑time, agentic AI applications that need low latency and steady performance across devices.
Moving from the home into the data center, Broadcom is also strengthening its position in mission‑critical infrastructure with the world’s first quantum‑safe Gen 8 128G SAN switch portfolio. That lineup includes Brocade X8 Directors and the Brocade G820 56‑port switch, designed for modern data-center workloads and enterprise AI.
On the software side, Broadcom’s plan to expand its strategic partnership with NEC around VMware Cloud Foundation (VCF) highlights why the VMware business is a core part of the AVGO story. VCF is positioned as an integrated platform for a “modern private cloud” that can run traditional, modern, or AI‑driven applications in a consistent way, with a focus on stronger security and lower total cost of ownership. Broadcom also notes that nine of the top 10 Fortune 500 companies already deploy VCF, which shows how deeply the platform is established inside large enterprises.
For the current quarter, the Street’s average EPS estimate is $1.66 versus $1.40 a year ago, which implies 19% YOY growth. Broadcom guided fiscal Q1 2026 revenue to about $19.1 billion, up 28% from the prior-year period. The firm also forecast for adjusted EBITDA of about 67% of projected revenue, which points to solid growth while still keeping profitability in check.
That setup helps explain why Wells Fargo’s Aaron Rakers upgraded Broadcom to “Overweight” from “Equal-weight” on Jan. 18. Rakers cited “meaningful incremental catalysts,” especially a deeper partnership with Alphabet tied to tensor processing units, and raised his price target to $430 from $410.
Mizuho analyst Vijay Rakesh also stayed positive, keeping an “Outperform” rating and lifting his price target to $480 from $450. His view is that hyperscaler capex could rise 32% to $540 billion in 2026, and he expects Broadcom and Nvidia (NVDA) to benefit from that spending, with AVGO ultimately pushing beyond a $2 trillion market capitalization.
AVGO stock has a consensus “Strong Buy” rating among 42 analysts with coverage. The mean target of $455.22 implies about 39% potential upside from its current price.
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Cathie Wood’s Broadcom buy makes sense if the goal is to ride the AI infrastructure buildout with a company that is already delivering real growth and throwing off serious cash. But you are not buying a bargain with AVGO stock — you are paying a premium multiple for premium execution, so this is best treated as a long-term compounder rather than a quick trade. With earnings expectations rising and management guiding to another strong quarter, shares of AVGO look more likely to grind higher than break down, even if the path includes pullbacks around earnings.
On the date of publication, Ebube Jones 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. This article was originally published on Barchart.com
