Investors Are Not Impressed by Strong Start to Earnings
Take financials, which reported blockbuster numbers last week that failed to juice their shares.
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Yahoo
an hour ago
- Yahoo
Broadcom Hits New High: Is AVGO Stock Still a Buy?
Broadcom (AVGO) stock has been on a tear, recently hitting a new all-time high of $310.34 on Aug. 7. The semiconductor and infrastructure software giant has delivered an impressive 107% gain over the past year, with nearly half of that surge occurring in just the past three months. These rapid gains have been primarily driven by explosive growth in its artificial intelligence (AI) semiconductor business. Moreover, the momentum in that business is showing no signs of slowing down. AI-Driven Demand Accelerates Broadcom's Growth Broadcom's latest earnings highlight just how strong this momentum has become. In its fiscal second quarter, Broadcom posted $8.4 billion in semiconductor revenue, marking a 17% year-over-year increase. This reflects acceleration from the 11% growth it reported in Q1. The biggest driver was AI-related sales, which brought in more than $4.4 billion, up an impressive 46% from last year. Q2 marked AVGO's ninth consecutive quarter of double-digit AI revenue growth, a streak that reflects the company's ability to capture market share in one of the fastest-growing segments. More News from Barchart 'It Will Be the Biggest Product Ever': Elon Musk Says Tesla's Optimus Robots Will Be Bigger Than Even Robotaxi Dear Archer Aviation Stock Fans, Mark Your Calendars for August 11 This Hidden-Gem AI Stock Has a Major Catalyst Coming on August 11 Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now! Within its AI business, custom AI accelerators grew at a solid double-digit pace, while AI networking revenue soared more than 170% year-over-year. AI networking, built on Ethernet technology, has been particularly strong, accounting for 40% of Broadcom's AI sales. Ethernet is popular because it works well for both small and large systems, making it the go-to choice for Broadcom's hyperscale customers. The company's robust networking portfolio, which includes its Tomahawk switches, Jericho routers, and network interface cards (NICs), is a key part of building AI systems in large cloud data centers and will support future growth. Broadcom's Growth Outlook Remains Solid Broadcom's growth shows no signs of slowing down, with strong performance across both its AI semiconductor and infrastructure software businesses setting the stage for continued momentum. The company's management expects AI semiconductor revenue to reach $5.1 billion in the third quarter, a solid 60% increase from the same period last year. This would mark a sequential acceleration in growth rate, signifying solid demand trends. One of the key drivers behind this surge is Broadcom's custom AI accelerators, known as XPUs. These chips are in high demand as major technology players scale up their AI infrastructure. Broadcom is currently working with three existing customers focused on large-scale AI deployments that depend on tailor-made XPUs. The company expects this demand to intensify, particularly as inference workloads grow rapidly. Management anticipates a notable ramp-up in XPU demand in the second half of 2026, which could further accelerate its growth rate. Broadcom's infrastructure software segment continues to deliver solid results, thanks in large part to the integration of VMware. In the second quarter, this business marked 25% year-over-year growth, generating $6.6 billion in revenue. A key growth lever here has been the shift from traditional perpetual licenses for VMware's vSphere to the subscription-based VMware Cloud Foundation (VCF) platform. This transition has been driving steady double-digit gains in annual recurring revenue, reflecting the stickiness of Broadcom's software model. Looking ahead, management is confident this momentum will continue. For the third quarter, Broadcom is guiding for infrastructure software revenue of around $6.7 billion, representing a projected 16% increase from a year ago. In summary, with solid demand in both AI hardware and subscription-based software, Broadcom's outlook remains strong, supporting its share price. Here's What Broadcom Stock's Valuation Indicates Of course, with such rapid growth, valuations have climbed as well. AVGO is currently trading at a forward price-earnings (P/E) ratio of 55.46x. That might seem steep, but Wall Street sees earnings growth, which justifies it. Analysts expect Broadcom's earnings per share to jump 47.7% in fiscal 2025, followed by a still-strong 28.7% growth rate in 2026. From a technical perspective, Broadcom's rally has room to run. The stock's 14-day Relative Strength Index (RSI) is sitting at 65.51, below the overbought level of 70, suggesting there's still potential upside if upcoming results impress. Analysts Are Bullish on Broadcom Stock Wall Street remains bullish on Broadcom. Analysts maintain a 'Strong Buy' consensus, pointing to the expected demand for its Tomahawk 6 switch and custom AI accelerators as key drivers of future gains. The highest price target on the Street stands at $400, suggesting potential 30% upside from current levels. On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
July CPI report expected to show inflation accelerated amid tariff pressures
July's Consumer Price Index (CPI) is expected to show prices rose at a faster clip annually compared to in June. The report, due Tuesday at 8:30 a.m. ET, comes as investors stay alert to how much President Trump's tariffs are starting to affect consumer costs. According to Bloomberg data, headline CPI is expected to have increased 2.8% year over year in July, up from a 2.7% rise in June. On a monthly basis, prices are forecast to increase 0.2%, a slight slowdown from June's 0.3% gain, driven by lower gasoline prices and expectations of moderately softer food inflation. On a "core" basis, which strips out volatile food and energy prices, the annual inflation rate for July is expected to tick up to 3.0% from June's 2.9%, indicating that rising goods inflation is no longer being offset by easing services inflation. Core prices are also projected to climb 0.3% month over month, outpacing the previous 0.2% rise seen in June and marking the strongest gain in six months. In June, signs of tariff-driven cost pressures emerged, with apparel prices up 0.4% on a monthly basis and footwear rising 0.7% after several months of declines. Furniture and bedding prices also gained 0.4%, reversing May's 0.8% drop, another signal that these higher costs are starting to reach consumers. Read more: What Trump's tariffs mean for the economy and your wallet "The July CPI will bring further signs of higher tariffs pushing up prices," Wells Fargo economist Sarah House wrote last week. "It is still early in the price adjustment process to see how higher import taxes will ultimately be distributed between the end-customer, domestic sellers and foreign exporters." "At the same time, growing consumer fatigue is making it more difficult to raise prices in general," House added. "We continue to expect inflation to pick up, but not ratchet higher, over the second half of the year, with both the core CPI and core PCE deflator returning to around 3% in the fourth quarter." Tuesday's report is set to arrive amid ongoing trade developments that could further alter the US effective tariff rate, now hovering near 18.6% — the highest since 1933, according to the latest Yale Budget Lab estimate. Still, markets are increasingly betting the central bank will lower interest rates at its September meeting, driven largely by concerns over the US labor market's health after significant downward revisions, alongside persistent inflation. "CPI could leave [the] Fed with dual headaches," Citi analyst Stuart Kaiser wrote in a preview of the report, adding investors will likely focus on updates to core goods prices. Read more: How to protect your savings against inflation "Goods inflation ticked up last month and may be an issue in upcoming reports too, as tariffs make their way through the system," Kaiser said. "The FOMC had 2 dissents in July and there is some uncertainty about the path forward (particularly if inflation heats up) although the direction of travel is clearly lower for policy rates." As of Tuesday afternoon, investors were placing an 87% probability the Fed cuts rates by 0.25% at its September policy meeting, up from 57% last month, according to the CME FedWatch Tool. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
an hour ago
- Bloomberg
Lithium Stocks Surge as Chinese Mine Closes After Permit Expires
Shares of North American lithium producers soared as investors bet that the suspension of a major Chinese mine would ease a supply glut and likely lead to a rebound in prices. CATL, the world's biggest battery producer, confirmed the closure of its Jianxiawo mine on Monday, saying it's seeking to renew its expired permit. The fate of the mine, the largest in China's lithium hub of Yichun, had been under close scrutiny for weeks amid speculation that authorities wouldn't extend its license. The mine accounts for about 6% of global output, according to Bank of America Corp.
