Broadcom: Chips, Acquisitions, and the Future

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Now, Broadcom – or AVGO, as the stock tickers insist we call it – has been on a bit of a tear, hasn’t it? Over the last five years, it’s gone up more than 600%. Which, when you think about it, is roughly the equivalent of climbing Mount Everest in flip-flops. A considerable achievement. It’s become a favorite among those who enjoy watching numbers go up, which, let’s be honest, is most of us. They’ve been selling chips – lots of them – and, crucially, acquiring other companies with a gusto that suggests a deep-seated fear of standing still.

A Brief History (and It’s More Complicated Than You Think)

The story begins, as many do, with a name change. It was once Avago, you see, before it absorbed the original Broadcom back in 2016. A bit like a particularly ambitious amoeba, really. They then decided to keep the Broadcom name, which is perfectly logical if you’re a large corporation. For years, they made a vast array of chips – the tiny, essential components that power pretty much everything these days – for mobile phones, data centers, networking equipment, and a whole host of other things. It’s a surprisingly diverse business, chipmaking. You wouldn’t think so, staring at a silicon wafer, but there’s a lot going on.

But simply making chips isn’t enough these days. So, Broadcom embarked on an acquisition spree, gobbling up companies that specialized in infrastructure software. The most recent, and rather large, meal was VMware. This wasn’t just about getting bigger; it was about diversifying. The semiconductor market is, shall we say, prone to fits and starts. Software, while not entirely immune to economic downturns, tends to be a bit more…predictable. Plus, bundling chips and software is a clever move. It’s like selling a car with a built-in sat nav – suddenly, you’re not just selling transportation, you’re selling convenience, and people are willing to pay a bit more for that.

Why the Stock Has Been Soaring

Much of Broadcom’s recent success is down to something called ASICs – Application-Specific Integrated Circuits. Try saying that five times fast. These aren’t your run-of-the-mill chips. They’re custom-built for specific tasks, and in this case, those tasks involve accelerating artificial intelligence applications. Now, Nvidia makes GPUs – Graphics Processing Units – which are fantastic all-rounders, capable of handling a wide range of AI workloads. Broadcom, however, focuses on making chips specifically for the biggest players – the hyperscalers, as they’re known. Think Meta and Google. They’re building massive data centers, and they want chips that are optimized for their particular needs.

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The idea is that these custom ASICs can be more cost-effective than Nvidia’s GPUs, at scale. It’s like having a bespoke suit tailored to your exact measurements versus buying something off the rack. It might cost a bit more upfront, but it’ll fit better and last longer. Broadcom then bundles these chips with other components, like optical and networking chips, creating a complete solution for data centers. It’s a tidy little package.

In their fiscal year 2025 (which ended last November), AI chip sales surged 65% to $20 billion, accounting for a remarkable 31% of their total revenue. That’s a lot of chips. It more than offset slower sales of their other products, which are subject to the usual economic whims. And they expect that number to keep growing, projecting $60-$90 billion in annualized AI chip revenue by 2027. That’s a figure that makes your eyes water, frankly.

Where Will Broadcom Be in Five Years?

Analysts are predicting that Broadcom’s revenue and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization – it’s a mouthful, isn’t it?) will grow at compound annual growth rates of 38% and 36%, respectively, from 2025 to 2028. If that happens, and the stock continues to trade at a reasonable multiple of its EBITDA (currently around 25 times), then the stock could nearly triple over the next five years. Of course, predictions are notoriously difficult, especially about the future. But if the AI boom continues, and Broadcom can maintain its momentum, then it’s a perfectly plausible scenario.

It’s a complex world, this world of semiconductors and software. But one thing is certain: Broadcom is a company to watch. They’ve built a solid business, they’re investing in the right areas, and they have a knack for making things happen. And in the world of finance, that’s a rare and valuable combination.

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2026-02-23 18:52