{"id":59717,"date":"2024-10-09T06:00:47","date_gmt":"2024-10-09T10:00:47","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=59717"},"modified":"2024-10-10T15:41:55","modified_gmt":"2024-10-10T19:41:55","slug":"ai-surge-fuels-nvidia-broadcom-stocks-buy-now-or-wait-for-a-dip","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2024\/10\/ai-surge-fuels-nvidia-broadcom-stocks-buy-now-or-wait-for-a-dip\/","title":{"rendered":"AI Surge Fuels Nvidia &#038; Broadcom Stocks: Buy Now or Wait for a Dip?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Artificial intelligence (AI) has been a red-hot investment theme over the past two years, with its ability to learn and improve without much human input, making it valuable across nearly every industry. PwC predicts that AI could boost the global economy<\/span><a href=\"https:\/\/www.pwc.com\/us\/en\/services\/consulting\/cloud-digital\/data-analytics\/artificial-intelligence.html\"> <span style=\"font-weight: 400;\">by $15.7 trillion<\/span><\/a><span style=\"font-weight: 400;\"> by 2030.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With AI adoption on the rise, chip stocks like<\/span><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NASDAQ_NVDA\"> <span style=\"font-weight: 400;\">NVIDIA Corporation (NVDA)<\/span><\/a><span style=\"font-weight: 400;\"> and<\/span><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NASDAQ_AVGO\"> <span style=\"font-weight: 400;\">Broadcom Inc. (AVGO)<\/span><\/a><span style=\"font-weight: 400;\"> are well-positioned for long-term growth. But with these stocks hovering near their 52-week highs, is now the right time to buy, or should you wait for a potential dip? Let\u2019s find out.<\/span><\/p>\n<p><b>Stock to Buy: NVIDIA Corporation (NVDA)<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Nvidia has been one of the most talked-about stocks this year, and for good reason. As one of the hottest large-cap stocks this year, the Wall Street darling is up nearly 14% in just the past week and more than 190% over the past year. It is trading just 5.6% below its 52-week high of $140.76. Much of this excitement is fueled by the company\u2019s new Blackwell platform, which has both investors and customers eagerly watching its next moves.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Several analysts remain<\/span><a href=\"https:\/\/finance.yahoo.com\/news\/nvidia-notches-fifth-day-of-gains-as-wall-street-stays-bullish-on-ai-182232404.html\"> <span style=\"font-weight: 400;\">bullish on NVDA<\/span><\/a><span style=\"font-weight: 400;\">, and it\u2019s easy to see why. KeyBanc recently raised its fiscal 2025 sales forecast to $130.60 billion, driven in part by Nvidia\u2019s new AI chips, which are expected to contribute around $7 billion to fourth-quarter revenues.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, the company\u2019s<\/span><a href=\"https:\/\/blogs.nvidia.com\/blog\/foxconn-taiwan-blackwell\/\"> <span style=\"font-weight: 400;\">collaboration with Foxconn<\/span><\/a><span style=\"font-weight: 400;\"> to build Taiwan\u2019s largest supercomputer, along with a massive manufacturing facility in Mexico, underscores Nvidia\u2019s commitment to scaling its operations while also minimizing supply chain risks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the<\/span><a href=\"https:\/\/nvidianews.nvidia.com\/news\/nvidia-announces-financial-results-for-second-quarter-fiscal-2025\"> <span style=\"font-weight: 400;\">second quarter<\/span><\/a><span style=\"font-weight: 400;\"> that ended July 28, 2024, Nvidia\u2019s revenue increased 122% year-over-year to $30.04 billion, and 15% from the first quarter. This robust growth exceeded analysts\u2019 expectations, who had forecasted around $28.75 billion. Its AI-driven Data Center Group generated $26.30 billion in revenue, resulting in a 16% sequential gain and a triple-digit growth of 154% over the same period last year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the bottom line, its operating income surged 174% from the year-ago value to $18.64 billion. NVDA\u2019s non-GAAP net income amounted to $16.95 billion or $0.68 per share, compared to $6.74 billion or $0.27 per share in the previous year\u2019s quarter, respectively. The chipmaker is now gearing up for new AI hardware releases based on the Blackwell architecture, which could boost demand in the coming years.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, it forecasted a revenue of $32.50 billion, plus or minus 2%, for its fiscal third quarter, representing an 81.6% growth from the year-ago quarter. However, this slightly falls short of the analysts\u2019 estimates of $32.90 billion. Nvidia\u2019s business continues to thrive and will likely report another blowout quarter next month.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition to its strong financials, the company has approved a massive $50 billion share buyback program, which could boost investor returns over time. This, combined with surging demand for AI platforms and upcoming product launches, makes NVDA a stock worth considering for long-term investors looking to buy on any significant dip.<\/span><\/p>\n<p><b>Stock to Hold: Broadcom Inc. (AVGO)<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Thanks to the escalating demand for its AI products, Broadcom delivered a better-than-expected earnings report with double-digit top-line growth, comfortably surpassing Wall Street\u2019s estimates. The demand for AVGO\u2019s products, essential for building Data Centers, has soared due to the extensive adoption of AI-powered applications, particularly within the enterprise sector.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The semiconductor division, which makes up 56% of its total revenue, has been the company\u2019s primary growth driver, while the remaining 44% falls into the industrial software segment. To keep pace with the surge in demand for AI technology, Broadcom is investing heavily in its product lineup, aiming to solidify its foothold in the booming AI chip market.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This frenzy for AI chips, driven by hefty investments in AI models, has significantly boosted the company\u2019s topline growth. For the<\/span><a href=\"https:\/\/investors.broadcom.com\/news-releases\/news-release-details\/broadcom-inc-announces-third-quarter-fiscal-year-2024-financial\"> <span style=\"font-weight: 400;\">third quarter<\/span><\/a><span style=\"font-weight: 400;\"> that ended on August 4, 2024, AVGO\u2019s net revenue increased 47% year-over-year to $13.07 billion, with triple-digit revenue growth in the Infrastructure Software segment to $5.79 billion. Its revenues came in slightly above the analysts\u2019 estimate of $12.96 billion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">AVGO\u2019s gross margin grew 7.5% from the year-ago value to $8.36 billion, while its non-GAAP operating income came in at $7.95 billion, up 11.2% year-over-year. On top of it, the company\u2019s non-GAAP net income came in at $6.12 billion or $1.24 per share, up 33.2% and 18.1% year-over-year, respectively. Also, its adjusted EBITDA increased 41.7% from the prior year\u2019s quarter to $8.22 billion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Looking ahead, management anticipates the revenue for the fourth quarter to be around $14 billion (in line with analysts\u2019 consensus estimates) and adjusted EBITDA to be approximately 64% of revenue, translating to about $9 billion. For the full year, Broadcom projects revenue of $51.50 billion, up from its previous forecast of $51 billion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, its robust free cash flow of $4.79 billion enabled it to pay a quarterly dividend of $0.53 per share on September 19, 2024. With 13 consecutive years of dividend growth, AVGO stands out among semiconductor-focused enterprises due to its consistent and significant cash flow distributions to shareholders.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company pays an annual dividend of $2.12 per share, yielding 1.21% on the current share price, with a four-year dividend yield of 2.50%. Over the past three and five years, its dividend payouts have grown at CAGRs of 13.5% and 14.7%, respectively.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When it comes to price performance, shares of AVGO have soared over 110% over the past year and returned nearly 62% year-to-date. The stock is trading just 2.4% below its 52-week high of $185.16. With accelerating revenue, robust profit margins, and significant exposure to the AI chip industry, AVGO has garnered immense investor interest. However, the stock\u2019s current valuation might burn a hole in one\u2019s pocket.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In terms of forward non-GAAP P\/E, AVGO is trading at 36.11x, 50.8% higher than the industry average of 23.94x. Its forward EV\/EBITDA and Price\/Cash Flow of 27.77x and 37.69x are 92.6% and 66.7% higher than the respective industry averages of 14.42x and 22.61x. Furthermore, the stock\u2019s forward Price\/Sales multiple of 15.85 compares with the industry average of 2.85.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Hence, given the lofty valuation levels, it may be prudent for investors to await a more opportune entry point into the stock.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Artificial intelligence (AI) has been a red-hot investment theme over the past two years, with its ability to learn and improve without much human input, making it valuable across nearly every industry. PwC predicts that AI could boost the global economy by $15.7 trillion by 2030. With AI adoption on the rise, chip stocks like [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":58197,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[33135,34833,34834,34832,31933,34123,34127],"class_list":["post-59717","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-broadcom-inc-avgo","tag-bullish-on-nvda","tag-by-15-7-trillion","tag-collaboration-with-foxconn","tag-nvidia-corporation-nvda","tag-second-quarter","tag-third-quarter"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>AI Surge Fuels Nvidia &amp; Broadcom Stocks: Buy Now or Wait for a Dip? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"As AI continues to reshape industries worldwide, chipmakers like NVIDIA Corp. 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