Opinions
Stan Wong
Broadcom
AVGO-Q
HOLD
Sep 12, 2024
Stock price when the opinion was issued
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Shares tanked today on news of China's DeepSeek stealing the AI crown from ChatGPT--DeepSeek is faster and cheaper. All AI-related stocks, including energy plummeted as the Nasdaq slid over 3%. He sold his shares already, but if the stock stabilizes, this may be a buy, because AVGO has a lot of business away from AI-related data centres. However, he doesn't know--this could fall further. It's a confusing situation that happened so suddenly that you have to sit on your hands and wait.
Having data centres in different regions is going to be increasingly important. AI is real, but absolutely ahead of itself. Phenomenal CEO. Up 30% YTD makes him choke on valuation. Best of breed tends to get a premium multiple. May get an opportunity to buy on a dip if we see some weak news coming out of the US.
Most important thing to know about semiconductor stocks, AI, and technology: it's exciting at the time, but there are going to be cyclical downturns. So there's going to be a pullback in capital expenditures in the space. Hard to tell when that's going to happen.
Pretty strong chart, with stock price well above the 200-day MA. Higher highs and higher lows. Not overly expensive compared to a lot of tech names out there. Trades around 27-28x earnings, 16-17% growth rate. Forward price to sales is up there at 13x. PEG ratio is 2x.
Need to be very selective in which names you want to own. There are some tech names trading at a PEG of 1x. Starting to see divergence in valuation. We're getting later in the game to be overly exuberant about technology because earnings are now broadening out beyond tech.