Shares of Broadcom (NASDAQ:AVGO) The stock jumped 16.1% on Thursday. As of 11:41 a.m. ET, the stock was up 13.2%.
The catalyst that drove the semiconductor specialist higher was strong Artificial Intelligence (AI) Results and stock splits.
Big boost from AI
In the second quarter, Broadcom generated revenue that grew 43% year over year to $12.5 billion, leading to adjusted earnings per share (EPS) of $10.96, an increase of 6%. The company noted that results were boosted by AI, as hyperscale cloud customers continue to upgrade to next-generation technology capable of powering AI.
Analysts’ consensus estimates were for revenue of $12.03 billion and earnings per share of $10.84, so Broadcom easily beat both benchmarks.
These results came on the back of strong demand for generative AI, as revenue from AI products reached $3.1 billion — a record — and accounted for 25% of Broadcom’s total revenue.
What is good for swans?
Perhaps most interesting for shareholders was the announcement that Broadcom nvidiareveals his identity, following in the footsteps of 10-for-1 Stock SplitManagement said its stock split was intended to “make ownership of Broadcom stock more accessible to investors and employees.” Since Nvidia announced its stock split on May 22, the stock has risen by 35%, so Broadcom investors are hoping for similar growth.
Shareholders of record at market close on July 11 will receive an additional nine shares for every share of Broadcom stock they own. The newly minted shares will be distributed after market close on July 12, and the stock will begin trading on a split-adjusted basis when markets open on July 15.
The adoption of AI is constantly growing. While no one knows for sure how big it will be, according to global management consulting firm McKinsey & Company, it is estimated that the size of the generative AI market could be between $2.6 trillion and $4.4 trillion in the coming years.
Broadcom currently trades at 31 times forward earnings, which is a pretty reasonable value for a company that provides the critical infrastructure for the AI revolution.
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Danny Vena has positions in Nvidia. The Motley Fool has positions in Nvidia and recommends it. The Motley Fool recommends Broadcom. The Motley Fool has positions in Nvidia and recommends it. Disclosure Policy,
Why Did Broadcom’s Stock Jump on Thursday? Originally published by The Motley Fool
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