Broadcom is The Steady Hand The Market Keeps Discounting Alex Sirois Wed, October 14, 2026 at 12:45 PM EDT 5 min read AVGO -2.73% NVDA -2.62% AMD -5.31% GOOG -1.02% META -3.32% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
AVGO stock barely moved in a year, yet revenue surged 85% to $30B and free cash flow hit $14B, a disconnect the author keeps buying into.
NVDA trades at 46x earnings with a thin dividend history, and AMD pays none, while Broadcom's 15-year streak of raises makes it the income investor's AI play.
Hock Tan projects AI revenue hitting $115B in fiscal 2027 and $230B in 2028, anchored by a long-term Google TPU deal.
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I added to my Broadcom (NASDAQ:AVGO) position again this week, and I'll keep doing it every time the market marks down a business that keeps getting bigger. Shares closed at $357.31 on October 13, up just 0.91% over the past year. Over that same stretch, third-quarter fiscal 2026 revenue grew 85.5% year over year to $29.59 billion. That gap explains every share I've bought.
Broadcom designs the custom AI chips that Google (NASDAQ:GOOGL), Anthropic, OpenAI and Meta Platforms (NASDAQ:META) build around their own models. It sells the Ethernet switches that wire those clusters together. It runs a VMware software business that brings in recurring cash. Then it pays me to wait. For a retirement account, I want exactly that mix: AI growth, a dividend that keeps rising and a management team that treats cash as shareholder money.
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Free cash flow reached $13.67 billion last quarter, or 46% of revenue. Out of that cash, Broadcom paid $3.1 billion in dividends and repaid $5.6 billion of long-term debt. After the quarter closed, it retired another $1.5 billion of senior notes. The remaining fixed-rate debt totals $59.6 billion at a 4% weighted-average coupon, with 7.4 years to maturity. A capital structure like that can take a weak quarter without putting the payout at risk.
The payout keeps climbing. The December 2025 raise to $0.65 per quarter was the fifteenth consecutive annual increase since fiscal 2011. At today's price, the forward yield works out to about 0.73%. That looks thin until I remember how consistently this board raises it. The earnings behind it have beat EPS estimates for 10 straight quarters, most recently $3.32 against a $3.24 estimate.
AI semiconductor revenue hit $16.70 billion in Q3, up 221%. Q4 guidance calls for $21.7 billion, up 236%. Management expects AI revenue of roughly $115 billion in fiscal 2027 and $230 billion in fiscal 2028. Google signed a long-term agreement covering future TPU generations, and management expects that deal to deliver multi-tens of billions of dollars of TPUs annually. Hock Tan put the economics simply: customers "can do all this at half the cost of a GPU." Software adds stability. Infrastructure Software revenue rose 29% to $8.8 billion at a 94% gross margin.
NVIDIA (NASDAQ:NVDA) is the default pick, and it trades near 46 times earnings. It only lifted its quarterly dividend from $0.01 to $0.25 in May 2026. I want an income record built over fifteen years of raises. Advanced Micro Devices (NASDAQ:AMD) trades near 228 times earnings and declared no dividend in its recent reports. Its latest quarter produced $1.558 billion of free cash flow, while Broadcom generated $13.67 billion.
A few of frontier labs drive this story. Tan said "the vast majority of compute demand for AI workloads today originates from this concentrated group", and he expects Anthropic to become Broadcom's largest XPU customer in 2027. Broadcom also built a financing platform with Apollo and Blackstone and may provide modest residual-value guarantees, which means a lab stumble could reach Broadcom's balance sheet. Sentiment is weak too. Chip stocks dropped this week after Tan's "casino" comment about AI investors, and the stock fell 12.59% on the day of its Q2 earnings report despite beating estimates.
I accept that risk because these customers sign multi-generation deals, the debt keeps shrinking and the dividend used $3.1 billion of $13.7 billion in quarterly free cash flow.
Q4 guidance calls for $34.8 billion in revenue, up 93%, with operating margin near 66%. Management also says it is on target to exceed $30 in earnings per share in fiscal 2028. The next earnings report lands December 9, 2026. The market keeps dismissing the steady hand, and I keep collecting that discount, one dividend and one share at a time.
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