Why Broadcom Stock Inched Higher on Friday
Key Points
One argues that it's sustainable, despite recent investor concerns.
Should that be the case, the company is in an excellent position to keep benefitting.
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Fresh research covering next-generation semiconductors proved to be a rising tide for the sector on Friday. Among the stocks benefiting was custom chip specialist Broadcom (NASDAQ: AVGO); it closed that trading session 1.2% higher, easily topping the 0.4% increase of the bellwether S&P 500 index.
The bulls weigh in
That morning, BMO Capital Markets analyst Harsh Kumar launched coverage of selected semiconductor and quantum computing stocks. In his estimation, Broadcom is No. 2 in the former sector with an outperform (read: buy) recommendation and $455 per share price target. It's behind only ubiquitous artificial intelligence (AI) chipmaker Nvidia.
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According to reports, Kumar believes the AI revolution is only getting started. Despite recent investor concerns about the vast amounts of capital being spent on AI build-outs, he feels this trend is here to stay for years.
Bolstering that argument was a similar analysis of AI companies by Nikolaos Panigirtzoglou, strategist at JPMorgan Chase unit J.P. Morgan. According to reports, he wrote that AI-related revenue from companies harnessing the technology is supporting capital expenditures for the build-outs.
The trend is quite a friend
Those takes are realistic and well-grounded, for sure; however, I don't think they'll entirely obliterate the understandable concerns about the significant ramp-up in AI spending. Still, if this trend is going to persist to any degree, I have little doubt Broadcom (and Nvidia, while I'm at it) will continue to reap the benefits. I'd be bullish on Broadcom's near- and long-term future too.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, JPMorgan Chase, and Nvidia. The Motley Fool has a disclosure policy.
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