Stacy Rasgon's Prediction About Broadcom (AVGO) Was Right

We recently published Top 10 Analyst Calls on Trending Stocks You Shouldn’t Miss. Broadcom Inc. (NASDAQ:AVGO) is one of the major analyst calls.

Stacy Rasgon, Bernstein senior U.S. semiconductor analyst, said in a CNBC program in May that AI demand is “off the charts” and CapEx is not slowing as it was feared. Rasgon liked Broadcom Inc (NASDAQ:AVGO) amid the company’s AI and software exposure:

“Look, I’ve liked the AI names. I felt that whereas for a lot of these other end markets people were really worried about what’s going to happen in the second half and whether demand is real or not, AI demand is real. I also think the AI hardware, if tariffs are implemented, is somewhat insulated because most of the AI servers come into the U.S. through Mexico — they’re USMCA-compliant and tariff-free. So I actually like AI. I like Broadcom Inc (NASDAQ:AVGO)— it has an AI story, and they’ve also got 40% of their revenue from software, which is safe. Their non-AI semis were already at a cyclical low.”

AVGO is up 80% over the past six months. For the fiscal fourth quarter, AVGO expects $6.2 billion in AI revenue, up 66% from a year earlier. The company said it secured $10 billion in AI infrastructure orders from a new customer. Many analysts believe this customer is OpenAI. Some media reports said the two companies co-designed a chip that will be launched next year.

Baron Technology Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:

“Broadcom Inc. (NASDAQ:AVGO) is a leading fabless semiconductor and enterprise software company, with approximately 60% of revenue generated from semiconductors and 40% from software. The company’s focus on high performance AI compute and networking solutions, coupled with its disciplined execution in software, positions it as a strategic leader in critical technology markets. Broadcom delivered a strong quarter, beating expectations for both semiconductors and software. AI remained the key growth engine – reaching a $4.1 billion quarterly run rate, up 77% year over-year – driving a solid ramp in semiconductor revenue, even as non-AI segments like wireless and industrial declined. Software surged, fueled by VMware integration and a shift to subscriptions. Management projected continued AI momentum and steady software execution, with a more pronounced AI ramp expected in the second half. Despite strong quarterly results, the stock retreated amid the same AI-related skepticism as NVIDIA, but primarily due to the broad market pullback on tariff and trade-relations concerns. We remain confident Broadcom is on track to win with its three custom AI accelerator customers and will capture the majority share in the custom-compute space. Broadcom’s lead customer, Google, just rolled out its 7th generation TPU, nicknamed Ironwood, and as Broadcom’s two unnamed (but well speculated) non-Google customers gain traction, confidence in the broader pipeline of four additional partners should strengthen, supporting continued growth in Broadcom’s AI business. We spent two hours with Broadcom’s CEO Hock Tan in March, and he told us in no uncertain terms that “all of them will aggressively ramp and push custom accelerators.”

While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.