Broadcom (AVGO): The Undervalued AI Infrastructure Leader to Buy Now

The semiconductor and software landscape is in flux, but one name stands out as a rare combination of resilience and growth: Broadcom (AVGO). Amid sector volatility driven by macroeconomic uncertainty and tariff fears, Broadcom has positioned itself as a dual-engine powerhouse, leveraging its diversified revenue streams, AI chip leadership, and a strategic buyback program to carve out an undervalued opportunity. Here's why investors should act now.

Diversified Revenue Streams Powering Growth

Broadcom's Infrastructure Software segment is no longer just a side note—it's a growth engine. In Q1 2025, it generated $6.7B in revenue, a 47% year-over-year surge, fueled by VMware's subscription shift, cybersecurity demand, and hybrid cloud adoption. This segment now accounts for 45% of total revenue, up from 38% a year ago, proving Broadcom's ability to diversify beyond its semiconductor roots.

Meanwhile, its Semiconductor Solutions segment—still the largest contributor at 55% of revenue—has been turbocharged by AI. Q1 AI semiconductor revenue hit $4.1B, a 77% YoY jump, with hyperscalers like Microsoft and Amazon investing in Broadcom's custom accelerators. The segment's 11% YoY growth masks a deeper story: non-AI semiconductor revenue dipped slightly on cyclical factors, but AI is already offsetting that drag.

AI Chip Leadership in a Red-Hot Market

Broadcom isn't just riding the AI wave—it's shaping it. Its two-nanometer AI XPUs and Tomahawk 6 switches (100 terabit capacity) are critical to hyperscalers building 1 million XPU clusters by 2027, a market Broadcom estimates could hit $60–90B by 2027.

The shift is already tangible. Meta's $65B AI infrastructure spend in 2025 includes a pivot toward Broadcom's chips, reducing reliance on NVIDIA. With four more hyperscalers in development phases, Broadcom is securing long-term contracts that insulate it from near-term macro headwinds.

Buyback Strategy Capitalizes on Undervaluation

Broadcom's $10B buyback program—launched in late January 2025—targets shares trading at a 26% year-to-date discount, thanks to a Nasdaq sell-off fueled by tariff fears. The forward P/E ratio has compressed to 18.5x, the lowest in a year and far below its five-year average of 22x.

This valuation discount is irrational. Broadcom's 25% YoY revenue growth, $14B cash reserves, and 66% adjusted EBITDA margins give it the financial flexibility to repurchase shares while funding R&D. The buyback alone will reduce shares outstanding by ~6%, boosting EPS and making the stock more attractive to income-seeking investors.

Why Broadcom Is Cheaper—and Better—Than Peers

While NVIDIA (NVDA) and Taiwan Semiconductor (TSM) command attention, Broadcom's valuation is a steal. NVIDIA's P/E of 44.66x reflects its AI GPU dominance, but its margins are under pressure. TSMC's P/E of 23.12x is low for its scale, but it lacks Broadcom's software diversification.

Broadcom's EV/EBITDA of 31.93x is average compared to peers like Lattice Semiconductor (79.35x) and NVIDIA (38.97x), but its balanced business model (80% semiconductors, 20% software) and 12-month revenue visibility from cloud contracts make it less risky.

Risks? Yes—but Manageable

The 15% of revenue tied to China exposes Broadcom to trade tensions, but its hyperscaler contracts—$4.4B in AI revenue expected in Q2—are a safer bet. Meanwhile, its $14.9B in Q2 revenue guidance (+19% YoY) underscores confidence.

Conclusion: Act Now Before the Market Catches Up

Broadcom isn't just an AI play—it's a total infrastructure solution with unmatched growth drivers. Its buyback is a catalyst for value creation, and its valuation is artificially depressed. With AI revenue set to hit $4.4B in Q2 and a SAM of $60–90B on the horizon, the math is clear: AVGO is undervalued, underappreciated, and ready to soar.

Investors who wait risk missing the next leg of this AI-driven rally. The time to buy is now.