There’s still time to ride Broadcom’s AI semiconductor wave

Shares of semiconductor Giant Broadcom ( AVGO ) has nearly doubled over the past year.

I last wrote about Broadcom in December 2024when the stock was trading at $162 per share, with the stock currently 50% higher since then. Last year was great for long-term bulls, but investors who had their eye on stocks without pulling the trigger might be feeling some hearty FOMO (fear of missing out) right now.

It is not done; Technology portfolio holders looking for yield, falling dividends, falling headlines. Despite its monumental one-year run, it’s not too late to invest in Broadcom. I am bullish on the company despite the upside rating, based on its history of generating exceptional long-term returns, the massive growth potential of the Ouch Market Chip and its compelling track record as a strong dividend growth stocksall this makes it an attractive opportunity for long-term investors.

The main reason it’s not too late to invest in Broadcom after its big year is because its recent metrics are nothing new for the stock: Broadcom is a long-term performer, not a flash in the pan.

In fact, over the past decade, Broadcom has generated a stellar 2,850% total return for investors, far outperforming broader benchmarks. While it’s been a good decade for equity investors, the S&P 500 (SPX), as represented by the Vanguard S&P 500 ETF (VOO), has generated a total return of 256% over the same period, meaning that this Broadcom generated ~10x the return of the broader market. An investor who put $10,000 into Broadcom 10 years ago would have an investment worth $280,500 today, while an investor who put $10,000 into VOO would have an investment worth $25,584 today.

Even when looking at the most tech-focused Nasdaq 100 (NDAQ), Broadcom has passed. The Invesco QQQ Trust (QQQ) has generated a strong total return of 456% over the past decade, but that strong performance still pales in comparison to Broadcom’s stellar return.

Winners usually win for a reason, and they tend to keep winning over time, which gives me confidence that it’s not too late for investors to add Broadcom to their long-term portfolios. While the law of large numbers means that Broadcom’s returns are unlikely to match those of the previous decade in the coming years, the stock is well-positioned for strong results (and returns) for its shareholders.

Broadcom’s spectacular performance over the years has somewhat overshadowed the fact that it’s also a dividend-pending stock, ranking among the top three in a better Tipranks’ Dividend shares comparison Although the stock yields just 1%, below the S&P 500’s average return of 1.3%, the company has a strong track record of growing its dividend payout.

Broadcom has paid dividends to shareholders for 14 consecutive years and has increased its nominal payout annually. Additionally, the semiconductor maker has grown its dividend at an impressive 14% compound annual growth rate over the past five years. The company also maintains a conservative dividend payout ratio of less than 50%, so there is ample room to increase the dividend as earnings grow. While the current yield of 1% may seem puzzling, this inability to grow dividends means that long-term shareholders will enjoy a higher yield than the higher cost as the company continues to grow its dividend payout to long term

Broadcom is a major player in AI chips, and while this market has gotten more hype than substance so far, there are strong reasons to expect growth in this sprawling sector in the coming years. Priority Research estimates the AI chip market size to reach $73 billion by 2024 and expects it to grow at a remarkable compound annual growth rate (CAGR) of 29% over the next decade to $928 billion. dollars in 2034. Obviously, obviously, a lot can happen between now and 2034, so these numbers are best taken with a few grains of salt, but illustrate The scale of the likely market for AI chips In the long term

Broadcom predicts the company can drive $60-90 million in sales of its custom AI chips by 2027, to an AI revenue base of $12 billion by 2024.

Given this massive growth potential, it’s no surprise that analysts also expect Broadcom to achieve continued earnings growth over the next few years. Wall Street analysts expect Broadcom’s EPS to grow 30% to $6.35 per share in 2025 before rising ~20% to $7.65 in 2026 and reaching $9.10 in 2027.

Back to Wall StreetAVGO has received a strong consensus rating of buy based on 23 buy ratings, three sell ratings and zero sell ratings assigned in the past three months. The average analyst Price target for AVGO shares of $237.08 per share implies a potential downside of 2.15% from current levels.

See more ratings from AVGO analysts

Broadcom stock has nearly doubled in value over the past twelve months, but long-term investors who didn’t pull the trigger on Avgo a year or so ago needn’t develop MOFOs or lament missing the boat. The stock is a perennial shareholder favorite with an exemplary track record of generating strong cumulative returns over the years.

I remain bullish on Broadcom based on its excellent track record and compelling dividend growth history. Although the AI chip market has to some extent been elevated by the market, we are still in the early stages of AI history, which leaves great potential for the future, especially for investors with a long enough investment horizon to commit to a resistant Trend Setter in the early days.

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