Broadcom Inc. (AVGO): A Bull Case Theory

We came across a bullish thesis on Broadcom Inc. on Nikhs’s Substack. In this article, we will summarize the bulls’ thesis on AVGO. Broadcom Inc.'s share was trading at $402.96 as of November 28th. AVGO’s trailing and forward P/E were 103.32 and 43.10 respectively according to Yahoo Finance.

Broadcom Inc. designs, develops, and supplies various semiconductor devices and infrastructure software solutions worldwide. AVGO’s latest results reveal a company transitioning from sustaining growth to accelerating it, driven by a structural shift in AI demand and a strengthening software cash engine.

AI semiconductors reached $5.2 billion in quarterly revenue, with custom XPUs now 65% of the mix—signaling deep, multi-year co-development partnerships that lock in hyperscalers. The emergence of a fourth customer with over $10 billion in committed AI rack orders, slated for recognition in Q3 FY26, reframes fiscal 2026 as an acceleration year rather than a continuation of FY25’s 50–60% growth.

This newfound visibility is reinforced by Q4 AI guidance of $6.2 billion and management’s confidence in materially higher growth next year. Crucially, the VMware acquisition has evolved into a powerful private-cloud utility, generating 77% operating margins and $7 billion in free cash flow. With over 90% of top customers now converted to subscriptions, Broadcom is entering Phase 2 of monetization—upselling security and disaster recovery into an increasingly captive base.

This recurring, high-margin software engine funds Broadcom’s aggressive AI roadmap, including Tomahawk 6 switches that collapse data center networking tiers and Jericho 4 routers that extend coherent AI fabrics across 100-kilometer distances.

Despite modest gross-margin pressure from higher XPU mix, operating and EBITDA margins remain exceptionally strong at ~65% and ~67%, supported by a $110 billion backlog and CEO Hock Tan’s commitment through 2030. Together, these dynamics establish Broadcom as a dual-moat business—an AI connectivity leader powered by a resilient, expanding software franchise—positioning it to capitalize on the distributed computing era that Sun Microsystems once envisioned but never monetized.

Previously we covered a bullish thesis on Broadcom Inc. (AVGO) by Daan Rijnberk in March 2025, which highlighted Broadcom’s AI-driven growth, VMware-led margin expansion, and strong free cash flow. The company’s stock price has appreciated approximately by 106.07% since our coverage. This is because the thesis played out. The thesis still stands as execution remains resilient. Nikhs shares a similar view but emphasizes accelerating AI visibility and the dual-moat model.

Broadcom Inc. is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 156 hedge fund portfolios held AVGO at the end of the second quarter which was 158 in the previous quarter. 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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Disclosure: None.