The advent of DeepSeek’s AI chatbot has thrown the technology sector (and markets) for a loop, sowing doubt and confusion regarding the future of the AI industry.
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This certainly extends to Broadcom (NASDAQ:AVGO), which dropped a hefty amount in the days since the news broke of the Chinese AI model that requires significantly less computational power.
Markets reacted to fears that decreasing demand for AI chips would negatively impact the trillion-dollar company, whose sales were $51.6 billion in 2024, up 44% year-over-year.
These fears are misplaced, according to one top investor known by the pseudonym On the Pulse.
“Despite DeepSeek’s rise, demand for U.S.-produced AI hardware, including Broadcom’s custom AI chips, remains strong, ensuring continued sales and profit growth,” asserts the 5-star investor, who sits in the top 3% of TipRanks’ stock pros.
On the Pulse explains that there are only a limited number of firms that can provide the “critical computing infrastructure” required by American firms, AVGO among these select few. In other words, the demand for AVGO’s products is going nowhere.
“I fail to see how the achievement of lower compute costs will curtail demand for semiconductors, servers, storage systems or wireless technology,” sums up the investor.
While year-over-year growth is slowing, notes On the Pulse, the company is still slated to increase sales by 12% to over $61 billion in the current year. The investor also expects the company’s gross margins to remain in the high 70s in 2025 as well, further supporting the bullish thesis.
Of course, the slumping prices have pushed share prices down, and AVGO is now trading at 27x leading profits, points out On the Pulse, adding that this is slightly cheaper than Nvidia’s 28x.
“The DeepSeek-inspired crash on (last) Monday created a whole bunch of new investment opportunities, in my view, and Broadcom is one hardware company that I would specifically recommend investors to buy on the dip,” concludes On the Pulse, who is rating AVGO a Buy. (To watch On the Pulse’s track record, click here)
That seems to be the consensus on Wall Street as well. With 23 Buy and 3 Hold ratings, AVGO enjoys a Strong Buy consensus rating. Its 12-month average price target of $236.29 would yield gains of ~8.5% in the coming year. (See AVGO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
