Broadcom: The AI Buyback Play to Weather the Nasdaq Storm

The Nasdaq sell-off of early 2025, driven by fears of tariffs and macroeconomic uncertainty, has created a testing environment for investors. Amid the volatility, one company stands out: Broadcom (AVGO), which announced a $10 billion stock buyback program in late January 2025 to capitalize on its undervalued shares. This move positions Broadcom as a top AI infrastructure play to buy aggressively during the downturn.

Ask Aime: What impact will Broadcom's $10 billion stock buyback program have on its future valuation?

Why Broadcom’s Buyback Matters

The Nasdaq Composite had fallen 7.5% by April 2025, with Broadcom’s shares initially dropping 20% after President Trump’s tariff threats. But management saw this as an opportunity: the buyback, set to run through December 31, 2025, allows the company to repurchase shares at a 26% year-to-date discount and a forward P/E multiple compressed to its lowest level in a year.

Key Data Point:

Broadcom’s AI-Driven Growth Engine

Broadcom isn’t just buying back shares—it’s betting on its role in the AI revolution. The company supplies custom silicon and networking solutions to hyperscalers like Microsoft, Amazon, and Alphabet, as well as Meta Platforms, which plans to spend $65 billion on AI infrastructure in 2025. Meta’s shift toward Broadcom-based chipsets to reduce reliance on Nvidia underscores the company’s strategic position.

Buyback Math: Undervaluation and Catalysts

• Buyback Scale: $10 billion equates to ~6% of Broadcom’s $160 billion market cap, a significant move to reduce shares outstanding.
• Valuation Signal: Broadcom’s forward P/E of 18.5x (vs. a five-year average of 22x) suggests the market has overreacted to near-term tariff risks.
• Margin of Safety: With $14 billion in cash and strong free cash flow (FCF), Broadcom can execute the buyback without jeopardizing its balance sheet.

Competitor Context: Why Broadcom Over Others?

While peers like Nvidia (NVDA) and Taiwan Semiconductor (TSM) are AI darlings, they lack Broadcom’s immediate buyback catalyst. Nvidia’s stock is down 28% from its 52-week high, but it hasn’t announced a buyback of this scale. Broadcom’s program directly addresses its undervaluation, making it a safer bet during the sell-off.

Risks and Counterarguments

• Tariff Headwinds: Broadcom derives ~15% of revenue from China, exposing it to tariffs. However, its 12-month forward revenue visibility (via cloud contracts) mitigates this risk.
• Buyback Timing: The Nasdaq’s volatility could delay the program. But with shares at a multi-year low, the risk-reward favors action.

Conclusion: A Rare Confluence of Value and Catalyst

Broadcom is the AI infrastructure leader with a $10 billion buyback to exploit its depressed valuation. Its role in Meta’s $65 billion AI buildout, hyperscaler partnerships, and a P/E at a one-year low make it a compelling “buy the dip” candidate.

Final Data Point:

Investors should take note: Broadcom isn’t just surviving the Nasdaq sell-off—it’s using it to fuel long-term growth. This buyback isn’t just a financial maneuver; it’s a strategic bet on AI’s future, backed by cold, hard data.