Broadcom Margin Compression Is The Cost Of Winning AI
Summarize this article with:
The Techie4.11K FollowersFollow5ShareSavePlay(10min)Comment(1)SummaryI'm upgrading Broadcom to a strong buy after the sharp post-earnings pullback and think the risk-reward scenario is more favorable at current levels.Despite margin compression from AI hardware mix, AVGO's AI semiconductor sales surged 74% year-over-year, and AI backlog stands at $73 billion for the next 18 months.VMware integration is delivering as expected, with infrastructure software revenue up 26% year-over-year and operating margins at 78%, stabilizing overall profitability.Short-term sentiment remains weak, but I expect AVGO to recover as expectations reset and investors refocus on fundamentals over narrative momentum.I hereon share my sentiment on Broadcom and why I see green shoots into 2026. Thawatchai Chawong/iStock via Getty Images My buy pre-earnings: caution was warranted I maintained a buy on Broadcom Inc. (AVGO) ahead of 4Q25 earnings. The stock shed over 11% on Friday, mainly driven by 1. renewed AI bubble fears and concerns, 2. expectationsThis article was written byThe Techie4.11K FollowersFollowI’m a retired Wall Street PM specializing in TMT; since kickstarting my career, I’ve spent over two decades in the market navigating the technology landscape, focusing on risk mitigation through the dot com bubble, credit default of ‘08, and, more recently, with the AI boom. In one word, what I’d like my service to revolve around is momentum.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.