Broadcom (NASDAQ:AVGO), a custom artificial intelligence chip designer, isn’t quite the market superstar that Nvidia (NASDAQ:NVDA) is. However, Broadcom might actually catch up to Nvidia in certain respects. Investors may choose to own shares of Broadcom stock and Nvidia stock for more complete portfolio exposure to the AI-chip industry.
Besides, Broadcom deserves credit for respecting its shareholders. The company shows its respect by delivering decent cash distributions each and every quarter. Therefore, growth and income investors should both take a closer look at Broadcom in 2024’s second half.
Broadcom Stock and the Catch-Up Trade
As we’ll discuss in a moment, Broadcom beats Nvidia when it comes to quarterly dividend payments. However, here’s something you might not have expected. One analyst actually suggested that Broadcom could rival Nvidia as a financial-market darling.
Citigroup analyst Christopher Danely declared that Broadcom stock is “catching up” to Nvidia stock as a semiconductor stock with the most positive investor sentiment.
According to Barron’s, Danely “met last week with investors to discuss their favorite and least favorite chip stocks,” and determined that Broadcom is “right behind” Nvidia in terms of upbeat investor sentiment.
Remember, this clearly isn’t a formal research study. Yet, Danely made some interesting points about Broadcom’s growth in the AI-chip industry. In particular, he observed that Broadcom “has more AI customers joining (Open AI and ByteDance) and accretion from VMware.”
That growth observation is a better reason to invest in Broadcom than just trying to play a “catch up to Nvidia” trade. In the end, there’s no need to pit Broadcom against Nvidia. They’re both good companies in a fast-growing AI-chip market.
Broadcom’s Enticing Dividends
Circling back to the idea that Broadcom respects its shareholders, we can confidently assert that the company pays an enticing dividend. Currently, Broadcom offers a forward annual dividend yield of 1.38%.
That might not sound like much, especially if you’re an income-focused investor. There are energy and real estate companies that pay higher dividends than Broadcom, no doubt.
But then, it’s not fair to compare Broadcom to energy and real estate companies. What’s more relevant is that Broadcom’s forward annual dividend yield is higher than the technology sector’s average yield of 1.025%.
For more tech-sector comparisons, note that Nvidia’s forward annual dividend yield is 0.04%. Meanwhile, Meta Platforms (NASDAQ:META) offers 0.43% and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) offers 0.47%. So, Broadcom is generous on a relative basis.
Broadcom Stock: A Good AI-Chip Income Opportunity
Will Broadcom “catch up” to Nvidia? Ultimately, it doesn’t really matter.
Per Barron’s, JPMorgan Chase analyst Harlan Sur envisions Broadcom as possibly generating “$150 billion in cumulative AI revenue over the next five years.” Thus, Broadcom is a fast-growing business in its own right, irrespective of Nvidia’s growth.
And if you like to collect quarterly cash distributions, Broadcom is more generous than some other famous large-cap technology companies. With all of this in mind, Broadcom stock earns a “B” grade and can be combined with Nvidia stock for potentially powerful results.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
