Broadcom Stock May Be Primed for a 2024 Split as AI and 5G Gain Steam

Manoj Prasad

Semiconductor giant Broadcom could be setting the stage for its first-ever stock split in 2024, according to analysts. With shares recently crossing the $1,100 mark, a split could make the stock more accessible to a wider range of investors.

Broadcom’s share price has been lifted by massive growth opportunities in artificial intelligence (AI) and 5G wireless technology. The company unveiled its Jericho3-AI chip in April, which allows up to 32,000 graphics processing units (GPUs) to connect at once. This level of power is needed for the split-second decision making required in AI systems.

Massive AI Opportunity Could Propel Broadcom Higher

Researchers estimate that AI could add $15.7 trillion to global GDP by 2030. Broadcom is positioning itself at the forefront of this revolution with its new Jericho3 chip. The device is optimized specifically for AI workloads in data centers.

As Forbes contributor Patrick Moorhead, Jericho3 “establishes a new bar for performance, efficiency, and flexibility for hyperscale AI.” Its specialized architecture allows three times more AI processing than previous generations.

This breakthrough has led analysts to paint a rosy picture for Broadcom in 2024 and beyond. Revenue for the company’s semiconductor solutions segment, which includes Jericho3, $35.819B for twelve months ending October 31, 2023. This growth is expected to continue as AI adoption spreads.

5G Smartphone Upgrades Boost Broadcom’s Near-Term Outlook

In addition to its long-term AI prospects, Broadcom is benefiting from the ongoing 5G wireless rollout. The company generates significant revenue from the RF chips and wireless components used in 5G smartphones.

Although overall smartphone sales slowed in 2022 amid economic uncertainty, analysts predict upgrade cycles will accelerate in 2024. As Anand Srinivasan [wrote in Forbes], AI analysis indicates iPhone sales will likely beat expectations this year, fueled by 5G upgrades.

Broadcom has a strong backlog of orders that will drive near-term growth. CEO Hock Tan said the backlog stands at $31 billion, up $2 billion from the previous quarter. He noted that demand remains robust, “reflecting our critical role in enabling the Fifth Generation Wireless or 5G upgrade cycle.”

Why a Stock Split Makes Sense for Broadcom

With its share price over $1,100, Broadcom stock trades at a lofty valuation. A split would make shares more accessible for retail investors and employees.

Broadcom completed multiple splits before being acquired by Avago in 2016. Avago kept the Broadcom name after the deal but has not yet split the stock.

Wells Fargo analyst Gary Mobley believes a split is likely at some point. As he told CNBC, Broadcom would be a “good candidate for a stock split,” as its price is relatively high compared to peers.

JPMorgan analyst Harlan Sur also sees a potential split on the horizon. In a December 2023 research note, he wrote, “We believe AVGO would consider another split in 2024.”

Outlook Remains Strong Despite Economic Uncertainty

Like many chipmakers, Broadcom faces risks from slowing economic growth and supply chain issues. However, the company enters 2023 with significant momentum.

Revenue jumped 22% in fiscal 2022, reaching $33.2 billion. Broadcom’s backlog and design win pipeline have analysts confident about future growth. AI, data centers, 5G, and automotive technologies will be key drivers.

Morgan Stanley analyst Joseph Moore summarized the bull case: “Broadcom is poised to be a major beneficiary of the early stages of the AI investment cycle playing out in 2023.”

If Broadcom delivers another year of double-digit growth, a stock split could be on the horizon. That would give more investors access to this AI and 5G powerhouse.

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