Latest 13F filings show that billionaire Stanley Druckenmiller's family office fund and Brad Gerstner's Altimeter Capital both sold Broadcom Inc. (NASDAQ: AVGO) during the second quarter and opened new stakes in Lam Research Corporation (NASDAQ: LRCX) instead. Bulls say Lam's multiple compression is due to the overall semiconductor selloff, not a fundamental issue. In fiscal Q4, the company beat earnings estimates and guided to a 52% gross margin for Q1, well above previous expectations.
Wafer fab equipment demand remains strong, with memory and advanced packaging contributing more meaningfully. Industry-wide equipment spending guidance for fiscal 2027 was also raised. Advanced packaging growth guidance was raised.
The company is expected to benefit from rising capex as companies spend to complete AI infrastructure buildouts. However, bears point to risks that spending on wafer fab equipment will prove less durable. The company's EPS estimates assume demand will stay strong, but customers can delay deliveries if memory prices weaken and utilization rates fall.
Despite the multiple compression, its multiple of over 30x is still above the company's historical average, and cyclical volatility could create valuation issues if the AI capex cycle slows. Brad Gerstner of Altimeter CapitalBroadcom Falling Out of Favor? AVGO is up just about 13% so far this year.
The stock recently wavered amid disclosure of a security vulnerability in VMware. In Q2, the company signed over $30 billion in AI orders during the quarter. For fiscal Q3, the company expects AI semiconductor revenue up 200% year over year.
For fiscal 2027, Broadcom expects $100 billion in AI revenue. Broadcom trades at a forward P/E of 33.80, well above the sector median of 24.51. The 15-year average P/E sits around 35x, and bulls argue the current multiple is justified given the pace of earnings growth.
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