It's been a hectic year for investors. Less than a month ago, the S&P 500 was down as much as 15% on the year while the tech-heavy Nasdaq Composite fared even worse -- dropping by as much as 21%.
Over the last several weeks, however, the capital markets have shown some signs of resiliency and gradually started to rebound. As of this writing, the S&P 500 is now near breakeven on the year while the Nasdaq is down by just 3%. One of the contributing factors to these recent jolts has been quarterly earnings. Throughout April, companies have reported financial results for the first quarter of 2025. And for the most part, investors appear to be pleased with where things stand.
In particular, artificial intelligence (AI) companies not only reported strong financials in Q1, but their outlooks remained quite robust. Cloud hyperscalers Amazon, Microsoft, and Alphabet maintained their capital expenditure (capex) guidance for the year, while Meta Platforms actually raised its AI infrastructure outlook. Indeed, these are positive tailwinds for GPU players such as Nvidia and Advanced Micro Devices.
While Nvidia is scheduled to report earnings on May 28, I actually have my eyes on another semiconductor stock that could be the better buy this month. Let's explore why Broadcom (AVGO -0.28%) looks like a great under-the-radar opportunity right now.
Rising AI infrastructure bodes well for Broadcom
Among cloud hyperscalers and Meta, AI infrastructure spend is forecast to be above $300 billion just this year. While much of that spend will be allocated toward GPUs developed by Nvidia and AMD, each of the "Magnificent Seven" players I referenced above are also building their own in-house chips. Custom silicon is a unique solution that Broadcom offers, hence rising AI capex from these players is also a positive sign for the company.
In fact, during the earnings call back in March, Broadcom CEO Hock Tan said that the company beat its AI revenue target "due to stronger shipments of networking solutions to hyperscalers." As Amazon, Microsoft, and Alphabet continue to outfit data centers with AI GPUs and networking equipment, it's highly likely that Broadcom is going to touch this infrastructure in some capacity.
Image source: Getty Images.
Management likes the stock, shouldn't you?
The chart below illustrates Broadcom's share price movement since the company reported its last earnings on March 6. While you might think these returns are due to a positively received earnings report, I think something else is at play here.
You'll notice that the entirety of the gains illustrated above occurred after March. What may have been the catalyst here?
Well, on April 7 Broadcom announced a $10 billion share buyback authorization. The repurchase program runs through Dec. 31. This does not mean that Broadcom has to buy all (or any) stock back; but if it chooses to do so, it only has until the end of the year.
Given that Broadcom made this announcement alongside a wave of encouraging earnings reports and renewed AI infrastructure investments, I think it's likely that management sees a rebound in store for the stock during the latter half of the year on the back of continued strength in the AI business and demand from hyperscalers. Hence, the timing of the buyback seems strategic in my eyes.
Is Broadcom stock a buy right now?
Broadcom is scheduled to report earnings on June 5. At that point in time, each of the Magnificent Seven companies and AMD will have reported. The common thread among them is that growth is humming along just fine across their respective AI businesses. I'm optimistic the same will be in store for Broadcom.
Should Nvidia's earnings report later this month follow in the footsteps of its peers, I think it's likely that Broadcom shares could get dragged into a macro uptick. Moreover, during the earnings report investors should also get an idea whether or not part of the stock's recent surge could be attributed to the buyback.
For these reasons, I think now is a great time to buy Broadcom stock -- before the company reports earnings in early June.
