AVGO Expands AI Portfolio With F2F 3.5D XPU: Is the Stock a Buy?

Broadcom AVGO is expanding its AI portfolio with the launch of the industry’s first Face-to-Face (F2F) 3.5D custom accelerators (XPU). Its 3.5D eXtreme Dimension System in Package (XDSiP) platform technology is now available, which helps consumer AI customers develop next-generation XPUs.XPUs are necessary to train Generative AI (GenAI) models, and they require complex integration of compute, memory, and I/O capabilities to achieve the necessary performance at lower power consumption and cost. 3.5D integration, which combines 3D silicon stacking with 2.5D packaging, is increasingly becoming popular for improved XPUs.Broadcom’s F2F stacking directly connects the top metal layers of the top and bottom dies, which provides a dense and reliable connection with minimal electrical interference and exceptional mechanical strength. The F2F offers better interconnect density (7 times increase in signal density) and power efficiency (10 times reduction in power consumption in die-to-die interfaces) compared with the Face-to-Back (F2B) approach.Broadcom’s F2F 3.5D XPU leverages Taiwan Semiconductor’s TSM cutting-edge process nodes and 2.5D CoWoS packaging technologies. It integrates four compute dies, one I/O die, and six HBM modules.AI Focus to Boost Broadcom’s ProspectsThe latest XPUs expand Broadcom’s AI portfolio. AI revenues are expected to be more than $12 billion for fiscal 2024.In the third quarter of fiscal 2024, AVGO witnessed strong demand for its custom AI accelerators, AI networking solutions, Ethernet switching, optical lasers, thin dies, PCI Express switches and Network Interface Cards from hyperscale customers.Custom AI accelerators grew 3.5 times year over year. Tomahawk 5 and Jericho3-AI grew more than four times year over year, while AVGO’s optical lasers and PIN diodes used in optical interconnects grew three-fold in the fiscal third quarter. PCI Express switches shipment more than doubled. Broadcom has started shipping its industry-leading 5 nanometer, 400 gigabit per second NICs and 800 gigabit per second DSPs.Considering fiscal fourth-quarter revenue guidance, AVGO’s fiscal 2024 revenues are now expected to be $51.5 billion, including a contribution from VMware, suggesting an increase of 42% from the prior-year levels.AVGO Shares Ride on Strong PortfolioBroadcom shares have appreciated 84.9% in the past 12 months, outperforming both the Zacks Computer & Technology sector and the Zacks Electronics Semiconductors industry. Over the same timeframe, the sector and industry have returned 37.7% and 55.4%, respectively.AVGO is benefiting from strong demand for its networking products. The acquisition of VMware has benefited Infrastructure software solutions. Broadcom’s strong partner base, including Arista Networks, DELL, Juniper and Supermicro, has been a key catalyst.Strong demand for Broadcom’s application-specific integrated chips (ASICs), designed to support AI and machine learning and make these tasks more efficient, aids top-line growth. Alphabet GOOGL and Meta Platforms META are notable users of Broadcom’s ASICs.AVGO Outperforms Sector Past 12-Month Image Source: Zacks Investment Research Broadcom is benefiting from an innovative portfolio. AVGO offers the industry’s first end-to-end PCIe connectivity portfolio, with its new PCIe Gen5/Gen6 retimers in combination with PEX series switches. The high-performance Jericho3-AI fabric for AI networks helps enterprises efficiently handle ever-increasing AI workload demands. Broadcom’s latest 400G PCIe Gen 5.0 Ethernet adapters address the escalating connectivity demands of AI ecosystems. Its Bailly is the world’s premier 51.2 terabits per second (Tbps) co-packaged optics Ethernet switch. AVGO’s VCSEL, EML and CW laser technologies enable high-speed interconnects for front-end and back-end networks of large-scale generative AI compute clusters.AVGO’s private cloud platform, VMware Cloud Foundation, is helping enterprises in their digital journey with the latest VMware Cloud Foundation Advanced Services.AVGO’s Earnings Estimate Revision Trend SteadyThe Zacks Consensus Estimate for fiscal 2024 earnings is pegged at $4.82 per share, unchanged over the past 60 days, indicating 13.95% year-over-year growth.The consensus estimate for fiscal 2024 revenues is pegged at $51.58 billion, indicating 44.01% growth over the year-ago quarter’s reported figure.The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $1.39 per share, unchanged over the past 60 days, indicating 25.23% year-over-year growth.The consensus estimate for fourth-quarter fiscal 2024 revenues is pegged at $14.06 billion, indicating 51.29% growth over the year-ago quarter’s reported figure.AVGO’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 3.28%. Broadcom Inc. Price and Consensus Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote Find the latest EPS estimates and surprises on Zacks Earnings Calendar.AVGO Shares Trading at a PremiumAVGO stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Sales, AVGO is trading at 13.10X, higher than its median of 12.2X and the sector’s 6.33X.Price/Sales Ratio (F12M) Image Source: Zacks Investment Research ConclusionBroadcom’s expanding AI portfolio, along with a rich partner base, reflects solid top-line growth potential. We believe these factors justify the premium valuation.Broadcom currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Broadcom Inc. (AVGO): Free Stock Analysis Report Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks