Broadcom (AVGO) and Dell Technologies (DELL) have both recently outperformed earnings expectations, sparking interest among investors, particularly those focused on artificial intelligence. With AI continuing to dominate tech conversations, understanding the investment potential of these two companies is crucial. This analysis dives into a comparison to help you decide whether to invest in 100 shares of Dell or AVGO following their latest quarterly results.
Broadcom Q2 Earnings and AI Growth
Broadcom is increasingly recognized as a key player in the artificial intelligence landscape. Analysts believe the semiconductor giant is poised to capitalize on the surging demand for generative AI and related infrastructure. This anticipation follows Nvidia’s (NVDA) impressive quarterly performance, fueled by the high demand for its AI chips. Mirroring Nvidia’s success, Broadcom exceeded expectations in its fiscal second quarter, with earnings per share (EPS) surpassing estimates by 2% at $10.32. This also represents a robust 14% increase in quarterly earnings compared to the same period last year. Revenue also slightly beat forecasts, reaching $8.73 billion, an 8% increase year-over-year.
According to Broadcom, AI-related revenue constituted 15% of its semiconductor business. The company anticipates continued growth in this sector, driven by its provision of Ethernet switches and fabric essential for AI networks. Current Zacks Investment Research estimates predict a 9% increase in Broadcom’s earnings for FY23, followed by another 5% rise in FY24, reaching $43.48 per share. Total sales are projected to increase by 6% this year and further by 4% in FY24, totaling $36.84 billion.
Dell Technologies Q1 Earnings and AI Partnership
Dell Technologies is another major technology company attracting significant attention, particularly due to its partnership with Nvidia on Project Helix, a generative AI initiative. This collaboration aims to empower businesses to leverage generative AI to enhance customer service, market intelligence, enterprise research, and various other capabilities.
Dell significantly surpassed its fiscal first-quarter EPS estimates, exceeding them by 50% with earnings of $1.31 per share, compared to the expected $0.87. However, this figure still represents a 29% decrease from the prior-year quarter, reflecting Dell’s acknowledgment of a challenging operating environment where customers remain cautious about IT spending. Despite these headwinds, sales came in 4% above expectations at $20.92 billion, although this was a 20% decline year-over-year.
Facing a challenging comparison to the previous year, Dell’s annual earnings are projected to decrease by 30% in fiscal year 2024 to $5.28 per share, down from $7.61 in FY23. However, projections indicate a strong rebound, with earnings expected to increase by 16% in FY25, reaching $6.15 per share. Total sales are forecasted to decline by 15% in FY24 before stabilizing and growing by 5% in FY25 to $90.81 billion. Furthermore, optimism surrounding Dell’s AI prospects remains strong, highlighted by the company’s development of a portfolio of Validated Designs for AI, aimed at simplifying IT infrastructure and accelerating insights.
Dell vs. AVGO: Comparing 100 Shares for Investment
Currently, both Dell and Broadcom stocks hold a Zacks Rank #3 (Hold). Broadcom’s stock has already surged by 43% this year, while Dell’s has increased by 13%. While both are considered “Hold” stocks by Zacks, meaning analysts suggest holding onto existing shares rather than immediate buying or selling, their future potential warrants consideration, especially when comparing an investment of 100 shares in each.
When considering whether to buy 100 shares of Dell vs AVGO, several factors come into play. Broadcom’s strong position in the semiconductor industry, particularly in areas benefiting from the AI boom, makes it an attractive growth stock. Its higher current stock price reflects this perceived growth potential. Investing in 100 shares of AVGO would represent a significant stake in a company directly benefiting from the AI infrastructure build-out.
Dell, while facing current headwinds in IT spending, is strategically positioned through its partnership with Nvidia and its AI-focused solutions. An investment of 100 shares in DELL offers exposure to the AI market, but also to the broader IT solutions sector, which may see a rebound in spending in the coming years. Dell’s lower stock price compared to Broadcom means 100 shares are more accessible to investors with smaller capital.
Investment Considerations:
- Growth vs. Value: Broadcom is perceived more as a growth stock due to its direct involvement in the booming semiconductor and AI infrastructure market. Dell might be seen as a value play, with potential for a rebound and growth in the IT solutions sector and AI applications.
- Risk Tolerance: The semiconductor industry can be cyclical, and Broadcom’s high growth expectations also come with potential volatility. Dell, while currently facing challenges, has a more diversified business and potential for stable long-term growth.
- Investment Horizon: For long-term investors bullish on AI infrastructure, Broadcom might be compelling. For those seeking potential value and a rebound in IT spending, Dell could be attractive.
Bottom Line
Deciding between 100 shares of Dell versus AVGO depends on individual investment goals, risk tolerance, and belief in the specific growth drivers for each company. Both Broadcom and Dell are positioned to benefit from the expanding AI landscape, but they offer different risk-reward profiles. While a Zacks Rank #3 (Hold) suggests neither is a strong “buy” right now, holding shares in either of these AI-related technology players could still prove to be a rewarding strategy for patient investors.
Disclaimer: This analysis is for informational purposes only and not financial advice. Consult with a financial advisor before making investment decisions.
