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Last week the Nasdaq (QQQ) dropped by 4.67% and is around 10% below its all-time high. The mega-cap firms like Nvidia (NVDA), Amazon (AMZN), and Microsoft (MSFT) weighed on the index. Broadcom (AVGO), among the most diverse technology firms in the artificial intelligence supply market, led the decline.
Analysts from Jefferies, Bank of America, and Morgan Stanley called AVGO stock falling by 10.36% last Friday a buying opportunity. Cautious investors concerned about the AI bubble are not buying.
Broadcom increased its total debt in the first nine months of the year. Last year, it closed its $69 billion acquisition of VMware. The high prices that companies paid are adding to Broadcom’s goodwill. This represented nearly 60% of its assets.
The weak guidance is a worry for the AI market. In the fourth quarter, it issued a revenue forecast of $14 billion. Analysts expected $14.13 billion. The firm expects two-thirds of its AI-related revenue from compute. One-third of the business is from networking.
CEO Hok Tan’s optimism for the networking side – accelerators, hyperscalers, and cloud – suggests that investors should watch communication equipment stocks. Companies like Coherent (COHR), Ciena (CIEN), Ericsson (ERIC), Nokia (NOK),
Cisco Systems (CSCO), and Motorola Solutions (MSI) are the related firms to watch.
If valuations in those stocks fall to better levels, consider starting a position in them.
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