As one of the few companies positioned to rival Nvidia NVDA in custom AI chips, the market is heavily anticipating Broadcom’s AVGO fiscal fourth quarter results on Thursday, December 11.
Thanks to its central role in the artificial intelligence boom, Broadcom stock has spiked +75% in 2025, impressively outperforming the broader market and Nvidia’s +38%.
Needless to say, the question of whether Broadcom is the best chip stock to invest in is certainly arising ahead of its Q4 report, with AVGO near a 52-week high of over $400 a share.
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AI Infrastructure Demand & VMware Expansion
Being a critical supplier of custom accelerators and networking products for hyperscale data centers, Broadcom’s stock has continued to rally this year after securing major partnerships with hyperscalers like Alphabet GOOGL and OpenAI to produce specialized AI chips.
Beyond chips, Broadcom’s VMware Cloud foundation and infrastructure software business is expanding, improving margins, and revenue visibility. Broadcom’s infrastructure software division, which now includes VMware, most recently reported $6.78 billion during its fiscal third quarter, up 17% year-over-year. Furthermore, before acquiring VMware in 2023, Broadcom’s quarterly infrastructure software revenue was under $2 billion, with the company now becoming a full-stack AI infrastructure vendor.
Broadcom’s Q4 Expectations
Broadcom’s top line is thought to have stretched 24% during Q4 to $17.5 billion compared to $14.05 billion in the comparative quarter. Notably, analysts expect AI-related revenues to surge 66% year over year to $6.2 billion. More importantly, Q4 EPS is expected to spike 32% to $1.87 versus $1.42 per share a year ago.
AVGO Valuation Comparison
At 43X forward earnings, Broadcom stock is not trading at a stretched premium to its Zacks Electronics-Semiconductors Industry average of 36X or Nvidia’s 40X. However, it’s noteworthy that AVGO is well above its five-year median of 17X forward earnings after recently trading at a high of 71X during this period.
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Bottom Line
While Nvidia dominates GPUs (graphic processing units), Broadcom’s custom ASICs (application-specific integrated circuits) are gaining traction for specialized AI workloads. The key difference is that GPUs are flexible, general-purpose parallel processors, while ASICs are highly specialized chips designed for one task, making them far more efficient but less versatile.
Still, the integration of VMware has done wonders to diversify Broadcom’s business as a full-stack AI infrastructure vendor. Broadcom stock currently lands a Zacks Rank #3 (Hold) as reaching or exceeding its Q4 expectations and offering positive guidance will be critical to reconfirming the tech giant’s enticing growth trajectory and justifying its valuation.
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This article originally published on Zacks Investment Research (zacks.com).