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Spotting Winners: Broadcom (NASDAQ:AVGO) And Processors and Graphics Chips Stocks In Q3
Spotting Winners: Broadcom (NASDAQ:AVGO) And Processors and Graphics Chips Stocks In Q3
Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Broadcom (NASDAQ:AVGO) and the best and worst performers in the processors and graphics chips industry.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
The 9 processors and graphics chips stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.1% while next quarter’s revenue guidance was 4.4% below.
While some processors and graphics chips stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.1% since the latest earnings results.
Broadcom (NASDAQ:AVGO)
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.
Broadcom reported revenues of $14.05 billion, up 51.2% year on year. This print was in line with analysts’ expectations, and overall, it was a strong quarter for the company with a significant improvement in its inventory levels and a decent beat of analysts’ EPS estimates.
"Broadcom's fiscal year 2024 revenue grew 44% year-over-year to a record $51.6 billion, as infrastructure software revenue grew to $21.5 billion, on the successful integration of VMware," said Hock Tan, President and CEO of
Broadcom Total Revenue
Interestingly, the stock is up 31% since reporting and currently trades at $237.11.
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Nvidia reported revenues of $35.08 billion, up 93.6% year on year, outperforming analysts’ expectations by 5.9%. The business had an exceptional quarter with an impressive beat of analysts’ EPS and adjusted operating income estimates.
Nvidia Total Revenue
Nvidia scored the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems content with the results as the stock is up 3.1% since reporting. It currently trades at $150.41.
Based in the US, SMART Global Holdings (NASDAQ:SGH) is a diversified semiconductor company offering memory, digital, and LED products.
SMART reported revenues of $311.1 million, down 1.7% year on year, falling short of analysts’ expectations by 4.3%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income and EPS estimates.
SMART delivered the weakest performance against analyst estimates in the group. The stock is flat since the results and currently trades at $21.
Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.
Qorvo reported revenues of $1.05 billion, down 5.2% year on year. This print beat analysts’ expectations by 1.8%. Zooming out, it was a satisfactory quarter as it also recorded an impressive beat of analysts’ adjusted operating income estimates but revenue guidance for next quarter missing analysts’ expectations significantly.
The stock is down 28.1% since reporting and currently trades at $72.25.
The result of a spinoff from Sanken in Japan, Allegro MicroSystems (NASDAQ:ALGM) is a designer of power management chips and distance sensors used in electric vehicles and data centers.
Allegro MicroSystems reported revenues of $187.4 million, down 32% year on year. This number met analysts’ expectations. However, it was a slower quarter as it logged revenue guidance for next quarter missing analysts’ expectations.
The stock is up 12.5% since reporting and currently trades at $24.99.
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.
Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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