Broadcom Inc. (AVGO) is set to release its fiscal third-quarter earnings on September 2 after the market close, and at least one strategist is positioning the chipmaker as a top pick for investors looking to capitalize on the next wave of artificial intelligence spending.
King Lip, chief strategist at BakerAvenue, told CNBC that he sees a fundamental shift underway in AI infrastructure investment. The market is moving away from the initial phase of model development toward real-world application deployment. "We see the tech trade as moving away from, you know, show me the model, if you would, to show me the money," Lip said.
According to Lip, industry workloads are rapidly transitioning from AI training to inference, where specialized chips execute dedicated, repetitive tasks at scale. In this second phase of hardware deployment, Broadcom holds a distinct structural advantage over traditional GPU-focused market leaders like Nvidia.
"Nvidia has been great for training models, but for huge repetitive type workloads, AVGO is our top pick for the next evolution in custom AI chips and inference play," Lip explained. He added that Nvidia doesn't necessarily have to lose for Broadcom to win in the AI chip space.
Broadcom's focus on custom application-specific integrated circuits (ASICs) and high-efficiency networking silicon positions it to capture demand as cloud giants seek lower-cost, tailored alternatives to generic GPUs. As lower-cost open-source models gain traction, Broadcom is uniquely positioned to monetize the transition toward targeted inference infrastructure without needing market share losses from GPU leaders to fuel its growth.
Heading into the quarterly print, Broadcom stock is down over 25% from its year-to-date high. The shares currently trade below their major moving averages, indicating that bears are firmly in control across multiple timeframes. However, Lip's constructive view is supported by the company's fundamentals and its role in the AI ecosystem.
Wall Street analysts remain bullish as ever ahead of AVGO's quarterly release. The consensus rating on Broadcom shares is Buy, with a mean price target of $534, according to The Wall Street Journal. The market expects the company to report $29.43 billion in revenue and $3.24 in earnings per share, representing year-over-year growth of 84.5% and 91.7%, respectively.
Broadcom also pays a dividend yield of 0.71%, which adds to its appeal as a long-term holding. However, investors should note the operational hurdles the company faces, including political friction around data center construction, local power grid constraints, and community moratoria that could slow hyperscale buildouts.
Despite these challenges, Broadcom's dominance in high-efficiency networking silicon and custom ASICs gives it a direct path to capture demand as the AI infrastructure buildout evolves. The company's ability to resolve physical execution bottlenecks and ward off emerging rivals will be key to its success.
For context, the broader chip sector has been under pressure recently, as seen in chip stocks sliding premarket and cooling ahead of Jackson Hole. Meanwhile, Nvidia's recent results have lifted AI cloud optimism, as noted in IREN stock climbing on Nvidia results, but Broadcom's custom chip approach offers a different angle on the AI trade.
This article is for informational purposes only and does not constitute financial advice.
