Early investors in this stellar semiconductor stock have seen their investments soar in value.
You don’t have to study stock charts daily to know that artificial intelligence (AI) stocks have been all the rage for the past couple of years. The market’s voracious appetite for semiconductor stocks, in particular, has resulted in shares of leading manufacturers like Broadcom (AVGO 2.44%) soaring in value.
But exactly how much have early investors in Broadcom benefited from the growing enthusiasm for AI stock? A lot. Those who clicked the buy button on Broadcom stock when it debuted on the public markets in August 2009 have seen their investments soar in value. An investment of $1,000 at the time of the company’s IPO would now be worth about $85,000. Investors have also seen their number of shares increase in quantity thanks to its stock split.
After only one stock split, investors have considerably more shares in their portfolios
While there are some semiconductor stalwarts that have completed several stock splits over the years — I’m looking at you, Nvidia — Broadcom has split its stock on only one occasion. And it happened recently. In July, Broadcom executed a 10-for-1 stock split. The math, consequently, is extraordinarily simple. If you purchased a single share of Broadcom stock when it held its IPO, you now have 10 shares sitting in your brokerage account.
With shares priced at about $140, it’s likely that management doesn’t see another stock split even remotely visible on the horizon.
Is now the time to load up on Broadcom stock?
Whether today represents a good opportunity to bulk up on Broadcom stock is a source of considerable debate. The company reported solid third-quarter 2024 financial results, including year-over-year increases of 47% and 42% for revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), respectively, and it issued auspicious guidance. However, the stock is trading at a rich valuation, changing hands at about 114 times trailing earnings and 28 times operating cash flow.
For investors hesitant to buy Broadcom stock due to its valuation, an artificial intelligence ETF that counts the stock among its holdings may be a better option.
Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
