This US growth stock just hit a trillion-dollar market cap! What next?

After soaring 24% in a single day last week, this US growth stock has catapulted past a $1trn market cap. Mark Hartley considers its future.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businesswoman analyses profitability of working company with digital virtual screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Christmas came early for one US growth stock as it joined one of the most exclusive clubs on Wall Street: the trillion-dollar club. It’s now joimed the ranks of Nvidia, Apple, Microsoft and other tech giants as the 10th company globally to reach $1trn.

Broadcom (NASDAQ: AVGO) rallied last Thursday (12 December) after posting its Q4 and full-year 2024 results, far outperforming analyst expectations.

Revenue for Q4 was $13.1bn, up 47% year on year, while earnings per share (EPS) came in at $1.25 — way ahead of the $1.13 estimated.

Should you invest £1,000 in Experian Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Experian Plc made the list?

See the 6 stocks

For 2025, it expects the performance to continue going from strength to strength. Revenue is projected to reach $14.6bn, with EBITDA making up two-thirds of that.

Created with Highcharts 11.4.3Broadcom PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Growth drivers

Over the past decade, the semiconductor company has made several acquisitions, helping it branch out into a range of new products and services. These include CA Technologies, which it bought for $19bn in July 2018, and later security software company Symantec for $10.7bn in August 2019.

But the most critical acquisition was that of VMware, purchased for $69bn in November 2023.

The successful integration of the virtualisation software was noted as a key driver of growth. It contributed $3.8bn in Q4 revenue, helping boost the company’s Infrastructure Software segment revenue by 200%. Its annualised booking value (ABV) climbed to $2.5bn, up 32% quarter on quarter.

CEO Hock Tan said VMWare is on track to achieve or exceed its $8.5bn adjusted EBITDA target by the end of 2025.

However, the takeover still raised a few eyebrows. Some customers have voiced concerns that service quality may decline under Broadcom’s more cost-effective operational style. There’s an ongoing risk that this may drive some customers to seek alternatives.

Riding the AI train

A big chunk of this year’s growth is attributed to the artificial intelligence (AI) boom dominating markets. 

Broadcom’s AI-enhanced ethernet products like Tomahawk 5 and Jericho3AI have helped catapult it onto centre stage. Its products now power much of the hardware that AI services rely on, including networking, wireless, data storage and wireless systems. 

Revenue from the sector increased 220% year-on-year, driven by “our leading AI XPUs and Ethernet networking portfolio,” said Tan.

Looking ahead

Research from MarketsandMarkets predicts the global AI market will reach $1.3trn by 2030, up from $214.6bn today. This could equate to compound annual growth of 35.7% for investors.

However, it’s a highly competitive field dominated by market leader Nvidia. Exactly how much of the market Broadcom can retain remains to be seen. Losing a key client like Apple or Samsung would eliminate much of the company’s profit. 

It could also suffer losses if US-China trade tensions cause supply chain issues.

Both these risks could derail performance in 2025.

What’s more, at $225 per share, it isn’t cheap and its forward price-to-earnings (P/E) ratio of 36.6 looks fairly high. While that’s common for rallying tech socks, it could still stifle future growth. 

Overall, I think there’s still a lot of growth potential in the stock. But with Christmas coming, I don’t have spare cash to buy the stock today. It’s definitely on my list though and I’ll consider it again after Donald Trump takes office in January.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, Microsoft, and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s the dividend forecast for Rolls-Royce shares as Trump rocks the markets

Rolls-Royce shares have joined in the volatility over the past week. However, with the direction being largely downwards, the dividend…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Dividend yields of up to 11%! Here are 3 UK passive income stocks to consider

Searching for ways to supercharge your passive income with UK dividend stocks? Here are three that have grabbed our writer's…

Read more »

Young Caucasian woman at the street withdrawing money at the ATM
Investing Articles

£10,000 invested in NatWest shares at the start of 2025 is now worth…

NatWest shares surged into 2025, but things have become a little more complicated in recent weeks. Dr James Fox explores.

Read more »

Investing For Beginners

Why the FTSE 250 could outperform the FTSE 100 for the rest of the year

Jon Smith explains why the FTSE 250 could do better than its big brother when factoring in domestic exposure and…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Tariff fears send the Lloyds share price tumbling, but the dividend yield is climbing

Just when the Lloyds Banking Group share price had been rising steadily, along comes a global upheaval to knock it…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Here’s how a stock market crash could help an investor retire years early

A stock market crash can be alarming -- but for the well-prepared investor, it can also be an exceptional opportunity…

Read more »

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »