Broadcom (NASDAQ:AVGO) is a top semiconductor maker that really doesn’t get enough love in this current market. Up more than 30% year-to-date, AVGO stock has begun to sell off alongside its higher-valuation peers. Companies like Nvidia (NASDAQ:NVDA) are leading the way lower, with concerns around a potential recession building as the macro environment deteriorates.

Of course, the question of how specific sectors will perform in a recessionary environment is unclear. And one thing is abundantly clear to many investors – we’re going to need chips, and a lot of them, to power an AI-driven future.

So, the question is how does Broadcom’s future outlook and its current valuation set the stock up from here? Let’s dive into the buy or sell question around AVGO stock right now.

Strong AI Position

Broadcom remains a key player in the semiconductor and networking markets, essentially underpinning the vast majority of internet traffic out there. As a top connectivity play, some investors have looked past Broadcom’s ability to ride the AI wave higher. And that makes senses, given the company’s strong earnings in the past and its recent acquisitions of VMWare and other deals which have distracted from this narrative.

That said, I think there’s a solid argument to be made that Broadcom remains an AI stock worth considering. The company’s Q2 AI revenue surged 280% to $3.1 billion, and total revenue rose 43% to over $12 billion, boosted by the company’s VMWare acquisition. The company expects a 42% revenue increase for the year and is expanding its AI-driven products, including next-gen switches and optics.

Moreover, Microsoft (NASDAQ:MSFT) and AMD’s (NASDAQ:AMD) recent earnings reports bolstered optimism in AI stocks. Despite a selloff across the board in most top-tier tech growth stocks, these companies are clearly seeing strong momentum from a demand perspective, which should drive fundamental growth over time. I think the same picture should be painted for a company like Broadcom, with so many verticals and applications for its existing technology.

OpenAI Opportunities

OpenAI is reportedly negotiating with semiconductor firms like Broadcom to develop new chips. The goal is to reduce dependency on Nvidia and enhance its infrastructure for advanced AI models. Altman is working with various stakeholders, including Microsoft and government bodies, to increase chip and compute capacity, aiming to maintain OpenAI’s leading position in the AI boom sparked by ChatGPT’s 2022 launch.

OpenAI and Broadcom have discussed Broadcom’s potential role in creating a new chip. The talks, still in their early stages, reflect OpenAI’s broader effort to collaborate with industry and government to expand AI infrastructure. OpenAI confirmed ongoing discussions with top chip designers and data center developers to enhance AI accessibility.

I think this is likely an overlooked potential catalyst for Broadcom, as the potential chip maker of choice for a custom purpose-built future. Whether it’s OpenAI or other organizations expanding in this space, there’s a lot to like about the company’s growth prospects moving forward.

Excellent Dividends

Aside from its strong revenue numbers, Broadcom also has an impressive and enticing dividend. The company is known to be one of the strongest dividend growth stocks. With a 1.38% yield, Broadcom gives back to their shareholders generously. And while that yield may be relatively low, it’s worth noting that much of that lower yield has to do with significant capital appreciation in recent years. So, for those with a long-term investing time horizon who believe the company will continue to hike its distributions, this could be a stock to consider on dips moving forward.

Any sort of future dividend growth will be driven by the company’s strong fundamentals. Broadcom has seen strong AI-related growth in recent quarters. And like other top chipmakers, this growth trend appears to be viable long-term.

So long as Broadcom’s earnings and revenue growth trajectory remains intact, there’s a lot to like about the company’s valuation at around 24x forward earnings. That’s my take at least.

AVGO Stock Still Looks Like a Buy

A key player in semiconductors and infrastructure software, Broadcom saw its shares soar in June, marking a record weekly gain. Of course, that momentum has slowed into early August. But the company’s strong AI sector performance and impressive quarterly results have solidified Broadcom’s status as a top chip stock.

I think the company’s outlook remains solid, and this is a stock I think is a relatively attractive bet from a comparable standpoint. For those looking to diversify exposure to the chips sector, AVGO stock ought to be a top pick. That’s my view at least.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.