Cathie Wood is once again making headlines. As the founder of ARK Invest and portfolio manager of ARK Innovation ETF (NYSEARCA:ARKK), Wood recently purchased roughly $27 million worth of Broadcom (NASDAQ:AVGO) shares during a market dip. Her move has reignited interest in one of the most important semiconductor names tied to artificial intelligence.
With AI models advancing at an exponential pace and infrastructure demand rising, investors are asking a simple question: should they follow Wood into AVGO? A closer Broadcom stock analysis helps frame the opportunity and the risks.
Broadcom Stock Analysis: AI Is Driving the Narrative
Artificial intelligence continues to evolve rapidly. New large language models are becoming more capable, especially in coding and automation tasks. As AI systems grow more powerful, they require significantly more compute power, networking hardware, and custom silicon.
This is where Broadcom enters the conversation. The company is widely regarded as a leader in custom AI chips and advanced networking solutions. Unlike pure-play GPU providers, Broadcom focuses heavily on application-specific integrated circuits (ASICs) and high-performance networking components that connect massive data centers.
As hyperscalers and cloud providers scale up AI workloads, demand for custom silicon and AI networking equipment could surge. That theme is likely what attracted Cathie Wood to add shares during recent volatility.
Performance: Strong, but Not the Strongest
Over the past 52 weeks, Broadcom stock has delivered an impressive return of about 46%. For most companies, that would be extraordinary. However, the iShares Semiconductor ETF (NASDAQ:SOXX) has gained nearly 64% during the same period, meaning AVGO has slightly underperformed the broader chip sector.
One possible explanation is investor rotation. As AI enthusiasm broadened, capital flowed not only into chipmakers but also into software firms and secondary AI beneficiaries. That may have diluted some of the attention from core semiconductor infrastructure names.
Still, Broadcom remains one of the most strategically positioned companies in the AI supply chain. If compute demand continues accelerating, infrastructure players like AVGO could regain leadership.
Broadcom Stock’s Valuation: Expensive or Justified?
No Broadcom stock analysis would be complete without examining valuation. On a trailing 12-month basis, Broadcom stock trades at a price-to-earnings ratio above 60x. That is elevated compared to the semiconductor ETF’s trailing P/E of roughly 44x.
However, forward metrics tell a different story. Broadcom’s forward P/E is closer to 40x, reflecting strong projected earnings growth. Even more telling is the company’s forward PEG ratio near 1.05 on a non-GAAP basis. Traditionally, a PEG ratio around 1 suggests a stock is fairly valued relative to its growth rate.
Wall Street currently expects earnings growth of about 50% in fiscal 2026 and 40% in 2027. Those are aggressive forecasts. Yet, if AI infrastructure spending remains robust, Broadcom could justify those numbers. The key variable is whether AI-related capital expenditures sustain their current pace.
Earnings Momentum and AI Demand
Broadcom’s latest quarterly results reinforce the bullish case. The company reported revenue of $18.02 billion and earnings per share of $1.95, beating analyst expectations on both top and bottom lines.
The semiconductor segment generated $11.1 billion in revenue, representing 35% year-over-year growth. Networking demand has been particularly strong, with backlog surpassing $10 billion. Broadcom’s Tomahawk 6 switch, a high-performance Ethernet solution for AI networking, is seeing record demand.
This strength underscores a crucial point in any Broadcom stock analysis: AI is not just theoretical. It is already translating into real revenue and backlog growth. If next-generation AI models continue pushing data center expansion, Broadcom stands to benefit directly.
Investors will be watching the upcoming earnings call closely for guidance on AI-related revenue and order trends. Any indication that hyperscaler demand is accelerating could serve as a catalyst.
What Analysts Think About Broadcom Stock
Sentiment on Wall Street remains broadly positive. Wolfe Research recently upgraded Broadcom to “Outperform” and set a $400 price target. The broader analyst community is even more optimistic, with an average target price around $453.77.
That consensus target implies potential upside of more than 30% from current levels. While price targets are not guarantees, they reflect confidence in Broadcom’s earnings trajectory and AI positioning.
When institutional investors, analysts, and high-profile fund managers align around a company, it often signals strong underlying fundamentals.
Should You Follow Cathie Wood?
Following prominent investors blindly is rarely a wise strategy. However, understanding the thesis behind their trades can be valuable. In this case, Cathie Wood appears to be betting that AI infrastructure spending is far from peaking.
From a valuation standpoint, Broadcom stock is not cheap on a trailing basis. But forward metrics and growth expectations suggest the premium may be justified. The company’s leadership in custom chips and AI networking provides exposure to one of the most powerful secular trends in technology.
That said, expectations are high. If AI spending slows or margins compress, AVGO’s elevated multiple could come under pressure.
In the end, this Broadcom stock analysis suggests that AVGO is a high-quality, AI-leveraged name trading near fair value based on growth projections. For long-term investors who believe AI infrastructure demand will keep expanding, adding shares on dips — as Cathie Wood did — could prove to be a calculated and strategic move.
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