The recent pullback in the Nasdaq Composite index, triggered by various factors such as tariff-fueled turmoil and concerns about AI spending growth, has led to a 12% decline from its peak in December 2024, putting it in correction territory. However, experts believe this dip might be an opportunity to invest in promising AI stocks.
Broadcom, the second-largest player in the AI chip market, has seen significant growth, with AI chip sales reaching $12.2 billion in fiscal 2024, a 220% increase from the previous year. According to consulting firm PwC, AI adoption could boost the global economy by 15 percentage points by 2035, indicating a strong potential for long-term growth.
Broadcom's AI revenue is expected to continue growing exponentially, driven by demand for custom AI processors and networking chips. The company has a potential revenue opportunity worth $60 billion to $90 billion over the next three fiscal years. Analysts expect Broadcom's earnings to increase by 36% in the current fiscal year, with healthy double-digit growth projected for the next couple of years.
With a price/earnings-to-growth ratio (PEG ratio) of 0.53, Broadcom might be undervalued considering its growth prospects. As the AI market continues to evolve, investing in companies like Broadcom could provide significant returns in the long run.
