Macquarie Expects Broadcom (AVGO) to Beat the Market Thanks to its Strong Position in the Niche Chip Sector

Broadcom Inc. (NASDAQ:AVGO) is included among the 15 Best Performing Dividend Stocks So Far in 2025.

Broadcom Inc. (NASDAQ:AVGO) is an American multinational semiconductor company. Macquarie expressed confidence in Broadcom’s long-term growth prospects, starting coverage of the semiconductor giant with an “Outperform” rating. Analyst Arthur Lai set a 12-month price target of $420 per share, implying about 17% upside from the prior Friday’s closing price. The stock has already surged 55% so far this year, which makes it one of the best perfoming stocks to invest in.

Lai noted that Broadcom Inc. (NASDAQ:AVGO) deserves to trade at a premium to its peers, pointing to its strong growth outlook, roughly 34% compound annual dividend growth in recent years, and a management incentive plan designed to support long-term strategy. He emphasized the rapid rise of application-specific integrated circuits (ASICs), which are growing faster than graphics processing units (GPUs). ASICs are more specialized chips, and Broadcom is seen holding a near-monopoly in AI ASIC and cloud networking solutions. According to Lai, global AI ASIC demand is projected to grow at a 72% compound annual rate from 2025 to 2028, with Broadcom expected to capture more than 70% of that market.

Broadcom Inc. (NASDAQ:AVGO)’s software business also adds strength. Following the VMware acquisition, the company’s operating margin improved to 66% from 62%, providing long-term margin stability, stronger free cash flow, and a potential re-rating for the stock.

Broadcom Inc. (NASDAQ:AVGO) has been growing its payouts for 14 consecutive years and currently offers a quarterly dividend of $0.59 per share. As of September 15, the stock has a dividend yield of 0.65%, as of September 15.

While we acknowledge the potential of AVGO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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