The Broadcom share doubled in 2024. Can this dominant AI share in 2025 double?

Broadcom (Avgo 2.16%))) Had an incredible 2024, with the stock more than doubled. After such an advance, many investors may be wondering how much upward potential is left.

Broadcom is in a great position in the AI ​​industry for artificial intelligence (AI). It helps to design user -defined AI accelerators and sell connectivity switches that are used in AI calculus centers. But is Broadcom still a solid share choice after the development of Deepseek R1 as less mathematically demanding model?

Broadcom’s investment thesis revolves around an increased use of his AI hardware

Broadcom is not just a company that is dedicated to the AI ​​market. The products include mainframe software, virtual desktop (mainframe-based software, with which users can access their personal desktop environments and software from any device) and to a AI product line. Most of the excitement of the share recently has been powered by its virtual desktop and AI products.

At the end of 2023, the recording of VMware completed a virtual desktop software. This has expanded a lot of growth for the company, but Broadcom’s management has annoyed the established VMware customers with some of its measures.

Broadcom met Vmware clients with stunning price increases (AT & TFor example, the VMware calculations said by 1,050%), which led to a lawsuit. Many customers have started looking for virtual desktop software elsewhere.

On the AI ​​page, Broadcom achieved enormous sales growth from the sale of hardware for the now built huge AI calculation centers. The sales of customer -specific AI accelerators and networking components rose by Broadcom 220% to $ 12.2 billion in the 2024 financial year, which ended on November 3.. This corresponds to around 24% of total sales.

However, the stock fell by more than 17% on Monday after the announcement of Deepseek’s R1 AI model, which was allegedly trained for only 5.6 million US dollars. However, the reaction of the market may have been somewhat hasty.

There is a lot of skepticism compared to this 5.6 million dollar number because Deepseek is not immersed in details about how it was derived. However, R1 has a clear efficiency compared to many of the generative AI models developed domestically, so this problem should not be ignored.

Regardless of this, the current setting of the market is: “Big Tech does not have to spend further money to build the AI ​​infrastructure if technology companies can train and execute the AI ​​software more efficiently.” As a result, every company whose business is connected to the provision of hardware for these servers has sold its stock this week.

Nevertheless, AI hardware investments will probably not stop just because a competitor has made a more advanced model.

Is it a purchase of Broadcom in this sense?

The stock is not yet cheap even after the sale

Before the sale, I would not have been a buyer of Broadcom shares. It was just too expensive. According to his recent haircut, it is a more sensible 32 -faker forward win.

Avgo PE Ratio data (forward) from Ycharts; PE = price for income.

However, there are still questions of how the VMware business will do if Broadcom continues to impose such outrageous price increases. The latest consensus under the Wall Street analysts was that the company would achieve sales growth of 19% in the 2025 financial year. This could prove to be an excessive optimistic estimate if AI investments collapse due to Deepseek.

Broadcom’s evaluation is still expensive compared to his big Tech colleagues. With so many questions that associate the prospects for AI and VMware in terms of AI and VMware, investors would have come up well to avoid the stock for the time being.