Broadcom Serves Up Bullish Comments for These Portfolio Holdings
While the market focuses on AI, we can’t ignore what was said about wireless.
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The portfolio’s position in Marvell Technology MRVL is benefiting handsomely Friday following very bullish comments about AI and networking from Broadcom AVGO Thursday night. During its earnings conference call, Broadcom said its AI and networking revenue grew 220% year over year in its fiscal fourth quarter and that it expects the current quarter to be a strong one as well, up 65% year over year.
Just like Marvell, Broadcom is being aided by overall AI demand as well as custom AI chip efforts. In Broadcom’s words, that opportunity is “massive” but it is also subject to product launches, which means we should not expect linear progress over the next several quarters.
During the November quarter, Broadcom’s networking revenue grew 45% year over year with its AI networking revenue up 158% compared to year-ago levels. As we've discussed, recent comments from Oracle ORCL and Ciena CIEN support our call for a more vibrant networking and carrier infrastructure market in the coming quarters. Broadcom echoed those thoughts during its earnings call, sharing it sees networking demand rising over the next several quarters as AI demand continues to ramp.
Those comments support our $130 price target for MRVL shares, but the underlying demand picture they paint also bodes well for Nvidia NVDA.
Broadcom’s Wireless Comments
While Broadcom’s AI comments are catching most of the attention, let’s remember the company also participates in the wireless market with its Wi-Fi and Bluetooth chipsets, counting Apple AAPL as a key customer. As we suspected, Apple is poised to debut in-house components that will replace Broadcom’s products with that initiative starting next year. That ramping effort will weigh on Broadcom’s wireless revenue, which contributed $2.2 billion in the November quarter.
Ahead of that shift, we can still get a read on Apple’s December quarter and the start of the March one via Broadcom’s wireless business. That $2.2 billion in revenue was up 30% sequentially and 7% year over year, and while Broadcom sees its wireless business down sequentially, which is typical, it is expected to be flat on a year-over-year basis at around $2 billion. Compared to Broadcom’s February 2024 quarter wireless revenue of $2 billion, that’s about a 9% sequential drop, which is less than the historical average decline we see moving from December quarter smartphone industry shipments to that for the March quarter.
While that outlook implies better-than-seasonal performance for Apple’s iPhone business, which would also be positive for our shares of Qualcomm QCOM and Universal Display OLED, we’ll want to cross-reference upcoming monthly revenue reports from Taiwan Semiconductor TSM and Foxconn to gain greater confidence. So far, reviews of Apple’s iOS 18.2 have been positive, but we still want to see that foster greater iPhone sales rather than solely rely on Broadcom’s outlook. As we get that confirmation, we’ll revisit our AAPL price target.
We would also mention that the market practically ignoring Apple’s bringing WiFi—Bluetooth chips in-house and the revenue impact on Broadcom, focusing instead on the AI opportunity at Broadcom suggests the market is likely to come around and recognize the AI PC, IoT, and automotive opportunities at Qualcomm. We recognize this will take time, but as those programs convert to revenue, especially those for AI PCs, we should start to see that re-think unfold. Our intent is to capture that value creation by owning QCOM shares.
At the time of publication, TheStreet Pro Portfolio was long MRVL, QCOM, AAPL and OLED.
