Broadcom: A Season of Shifting Currents

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The year turned, and with it, a certain expectation of continuation. I had observed, some months prior, the ascendance of Broadcom (AVGO +0.15%), a current in the vast ocean of connectivity and, more recently, the burgeoning tide of artificial intelligence. The prediction, as it happened, proved…accurate. The company did not merely rise, but flowed upwards, a 25.6% gain in the latter half of the year, eclipsing even the celebrated “Magnificent Seven.”

Such growth, inevitably, alters the landscape. The Seven, once a constellation of dominance, felt…incomplete. And so, a new grouping emerged, a ‘Ten Titans,’ as I termed it—a more comprehensive accounting of those who truly shape the markets:

  • Nvidia (NVDA 0.72%)
  • Alphabet
  • Apple
  • Microsoft
  • Amazon
  • Broadcom
  • Meta Platforms
  • Tesla
  • Oracle
  • Netflix

These ten, together, constitute a significant portion—38.1%—of the S&P 500. A collective weight, pressing down upon the indices. Yet, even Broadcom, despite its vigorous climb, has known a momentary retreat, a yielding to the prevailing winds. A 22.5% decline from its peak. But within this apparent setback lies, perhaps, an opportunity. A chance to observe the roots, exposed by the shifting soil.

Why the Currents Turned

The gain of 447% over three years is not born of steady, predictable growth. It is a sudden blooming, a burst of unexpected color. Such rapid ascent often invites correction, a rebalancing of forces. The market, it seems, had underestimated the potential of Broadcom’s foray into artificial intelligence, viewing it still as a company rooted in the established networks, the familiar landscapes of enterprise software and broadband.

Indeed, much of Broadcom’s existing business remains…stable. A quiet stream, flowing at a consistent pace. But the AI business…that is a different matter. A tributary, gathering strength, carving a new path. Broadcom has found a niche, designing custom XPU chips, coupled with networking devices—the Tomahawk 6 switches, the Jericho4 routers. A precise instrument, tailored to a specific task.

The solution, it is said, can be more cost-effective than the general-purpose GPUs for certain functions. A tailored garment, fitting more snugly than a mass-produced coat. The partnership with Alphabet, on the Tensor Processing Unit, has drawn attention. And the integrated system…it addresses the bottlenecks in these burgeoning data centers—the congestion, the limitations of memory, the inevitable delays. It is a question of flow, of ensuring that the current does not falter.

The advancement of memory chips has not kept pace with the power of the GPUs. A narrow channel, attempting to accommodate a surging tide. This creates a demand for high-bandwidth memory, driving the fortunes of companies like Micron Technology. It is like a powerful engine, starved of fuel. Broadcom’s solution does not solve the memory issue, but it does address the network, widening the channel, improving the flow.

The recent selling, however, speaks to a dependence on the spending of these hyperscalers, these vast data centers. And the emergence of Nvidia, with its vertically integrated rack-scale systems, presents a challenge. A rival current, attempting to divert the flow. Nvidia’s Vera Rubin architecture, with its five integrated chips, promises reduced costs and accelerated workflows. A direct challenge to Broadcom’s foothold in the network.

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A Season for Observation

The spending cycles of these hyperscalers, the competition…these are currents to be observed, to be understood. But the pie, as they say, is large enough for many to partake. Supply chain limitations, too, discourage dependence on a single source. And the orders received by both Broadcom and Nvidia in recent quarters suggest that both are winning business.

It remains crucial, however, to listen closely to management commentary, to discern whether Broadcom can continue to secure contracts, to build these custom chips for major clients, and whether these solutions translate into measurable cost savings within these immense data centers.

In the meantime, a price-to-earnings ratio of 31.1 is…reasonable, given the company’s growth potential. Especially considering that Broadcom is not placing all its bets on AI, but retains other avenues for expansion. A diversified portfolio, a hedge against the unpredictable currents of the market. It is a season for observation, for careful consideration, and for a quiet confidence in the enduring power of a well-engineered current.

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2026-02-01 03:26