Broadcom: the custom-silicon business nobody prices
Broadcom builds the custom accelerators that the largest cloud providers design for themselves. That business is growing faster than the merchant market and carries software-like margins, yet the stock trades as a mature semiconductor name.
Sample research report used to test the layout. Delete before launch.
Thesis
Two businesses in one: a slow, cash-rich networking and software franchise, and a custom-chip business growing at rates the market normally pays up for. The blended multiple undervalues the second.
Catalysts
- New custom-chip customers named on the next call.
- Software segment margins, which keep climbing after the last acquisition.
Risks
- Customer concentration in the custom business.
- Debt from acquisitions, which limits flexibility if rates stay high.
What would prove me wrong
A custom-chip customer moving production in-house or to a rival. The moat here is the relationship, not a patent.
Position
Half position, adding on a breakout above the summer high.