Broadcom isn't your grandpa's tech company. This powerhouse isn't just about making phones talk wirelessly anymore. EasyAssetManagement talks about how they're a major player in the infrastructure that keeps the digital world running smoothly.
From data centres to artificial intelligence, Broadcom supplies the silicon chips, hardware, and software that power everything from cloud storage to deep learning. Their diverse reach across these booming markets makes them a leader with unmatched capabilities, solidifying their position at the forefront of the tech infrastructure revolution.
Broadcom reigns supreme in the data centre. They control a staggering 80% of the $5-7 billion market for these essential chips, and it's not easy for anyone else to compete. Their secret weapon? A "2x Moore's Law" approach. Basically, they're doubling the performance of their Tomahawk switching chipsets every two years. This aggressive pace keeps them way ahead of the competition, with a constant two-step lead in performance. In other words, Broadcom isn't just winning, they're leaving everyone else in the dust.Broadcom isn't messing around. They're doubling the performance of their top-tier switching chips every two years. This means their cloud, hyperscale data centre, and AI cluster customers get twice the power for their money every 24 months. And they're not slowing down! Later this year, they're shipping out the next generation of their Tomahawk chips, built on cutting-edge 3nm technology.
No wonder Broadcom's networking silicon is the engine room for the biggest AI clusters at Google, Meta, Amazon, and even tech giants like Alibaba and ByteDance. In fact, they're paving the way for mind-blowing AI clusters with over 1 million GPUs or XPUs! With this kind of innovation, Broadcom is clearly at the forefront of the data centre and AI revolution.
The company’s got the moat and they're digging it deeper! Their fast two-year chip upgrade cycle makes it super tough for competitors to catch up. But they're not stopping there. Broadcom keeps adding new features to their chips, specifically to support massive AI clusters with over a million specialized processors (XPUs). They're always thinking ahead – right now, they're designing not just their next chip, but the one after that. This next-next-generation "Tomahawk 7" platform will be built on even more advanced 2nm technology. Basically, Broadcom is so far ahead, they're practically playing a different game when it comes to data centre switching.
Data centres and AI clusters are getting a major speed boost! The need for faster connections (800Gbps) in cloud computing and AI is driving huge demand for Broadcom's latest chips, the Tomahawk 5 for switching and Jericho 3 for routing. Things are about to get even faster. Next year, the upgrade cycle jumps to an even more powerful 1.6Tbps with the launch of Tomahawk 6. This blazing speed is a major reason Broadcom's AI networking revenue is expected to triple this year, reaching over $3 billion. And with no signs of slowing down, that growth is likely to continue well into 2025. Broadcom is clearly at the forefront of this data centre and AI speed revolution.
The company’s cash pile took a bit of a dip at the end of the second quarter. They started with around $9.81 billion, but that's down $2.05 billion from the previous quarter.
Here's the breakdown: they generated a healthy $4.58 billion in cash flow from their operations, but that was offset by a few things. They paid out $2.44 billion in dividends to shareholders, invested $132 million in expanding their business, paid down $2.00 billion in debt, and used $1.55 billion to buy back some of their own shares. So, while their cash reserves shrunk a bit, Broadcom is still in a strong financial position.
Broadcom trimmed some fat in their inventory pile this quarter. Their inventory value dipped by $78 million, going from $1.92 billion to $1.84 billion. This means they're selling their stuff faster – their inventory turns over in just 54 days now, which is lower than the typical timeframe they've seen in the past three years (69 days).
On the flip side, it's taking customers a little longer to pay their bills. The average time it takes to collect payment (DSOs) increased by 2 days to 40 days, which is also above their three-year average of 31 days. However, there's a bright spot! Broadcom is investing more in their business – their capital expenditures went up by $10 million this quarter. So, even though they're collecting payments a bit slower, they're putting their money back into growth.
The company is the unseen champion, powering the data centres and AI that fuel our digital world. Their lead in chip performance is massive, and they're constantly innovating. With next-gen tech and booming demand, Broadcom is setting the pace for the future.
Easy Asset Management is heavily invested in the future of Artificial Intelligence. We've held Broadcom stock, a major player in the field, and own shares in other similar companies, like Arista Networks in particular.
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.
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