Broadcom Hits $1T Market Cap: Are Broadcom ETFs the Next NVIDIA?

Chipmaker Broadcom AVGO has reached a milestone valuation of $1 trillion, following a 24.4% surge in its shares on Friday – its best trading day on record. With this gain, Broadcom becomes just the ninth U.S. company to exceed $1 trillion in market capitalization.

The spike came after CEO Hock Tan predicted a huge expansion in Artificial Intelligence (AI)-related revenue, estimating a $60 billion to $90 billion market opportunity by 2027—more than quadrupling the current market size. The company also topped first-quarter revenue forecasts, fueling investor optimism.

The stock has jumped about 107% this year, as tech companies have flocked to develop and deploy custom AI infrastructure. Note that chip giant NVIDIA NVDA hit $1 trillion market cap last year; its valuation has since soared beyond $3 trillion. This raises the question: can Broadcom be the next NVIDIA?

AI Market Projections: A Mixed Bag of Opportunities

CEO Tan also announced Broadcom’s partnership with two major hyper-scalers and projected fiscal 2024 AI revenue of $12.2 billion. Analysts have mixed views on Broadcom’s market share and the AI sector’s growth.

TD Cowen described the predictions as “difficult to prove/disprove,” as quoted on Reuters. TD Cowen analysts noted that Broadcom could capture up to $50 billion in AI sales by 2027, assuming it retains the 70% market share it claimed in 2024.

Rosenblatt Securities projected a more conservative 20% to 50% market share, factoring in competition from rivals like NVIDIA, as quoted on Reuters. Whatever the market share projection by 2027, Broadcom’s presence in the AI space is going to be huge.

Bernstein analyst Stacy Rasgon noted that Broadcom’s optimistic projections positioned the company as a key player in the AI chip market. With AI transitioning from training models to inference, more chip companies are poised to gain a competitive edge over NVIDIA, and Broadcom serves as an early indicator of this shift, per Thomas Hayes of Great Hill Capital, as quoted on Reuters.

Broadcom vs. Competitors: Valuation & Clientele

Broadcom is slightly less pricey than NVDIA at the current level. Broadcom’s 12-month forward price-to-earnings (P/E) ratio stands at 29.8X, slightly lower than NVIDIA’s 31.03X. Broadcom stock’s P/E (trailing twelve month) stands at 46.30X versus NVIDIA’s 51.28X. While Broadcom’s shares have risen over 107% this year, NVIDIA’s stock has surged 178%.

Broadcom is capitalizing on Big Tech’s efforts to diversify AI chip suppliers amid NVIDIA’s high prices and constrained supply. Major cloud providers like Microsoft MSFT and Meta META are driving demand for data centers, boosting Broadcom’s growth. Alphabet GOOGL is reportedly Broadcom’s largest custom chip customer.

Analysts at Bank of America reiterated their buy rating on the stock, partly due to its “surging AI opportunity,” as quoted on CNBC. They said Broadcom currently rules the market for custom chips designed for internal workloads, but they warned of stiff competition from NVIDIA's dominance in merchant silicon and enterprise customers.

Broadcom ETFs in Focus

Against this moderate-to-upbeat backdrop, investors can consider Broadcom-heavy exchange-traded funds (ETFs) to diversify their exposure while remaining invested in the chipmaker. These ETFs include Columbia Semiconductor and Technology ETF SEMI, VanEck Fabless Semiconductor ETF SMHX, iShares U.S. Tech Independence Focused ETF IETC, Invesco PHLX Semiconductor ETF SOXQ, and Amplify Cybersecurity ETF HACK.

These above-mentioned ETFs put at least 10% of their weights in Broadcom. And if you are too bullish on Broadcom, you can play ETFs like Direxion Daily AVGO Bull 2X Shares AVL, Defiance Daily Target 2X Long AVGO ETF AVGX (see all Single Stock ETFs here).

Broadcom’s Dividend Story

Thanks to its strong financial performance, Broadcom announced an 11% increase in its quarterly dividend to $0.59 per share for fiscal 2025, marking the fourteenth consecutive annual dividend increase since 2011.

As a result, Broadcom has solid presence in dividend-based ETFs like SPDR Portfolio S&P Sector Neutral Dividend ETF SPDG, First Trust NASDAQ Technology Dividend Index Fund TDIV and FT Vest Technology Dividend Target Income ETF TDVI. With these ETFs, investors can enjoy decent capital gains along with steady current income. ETFs SPDG, TDIV and TDVI yield 2.55%, 2.10%, 8.25%, annually, respectively.

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