In a war, the party with the larger set of arms is at an advantage. Today, in the war of AI, memory chips have become the most sought-after set of weaponry for chipmakers, who are racing to secure long-term supply agreements in a red-hot demand environment for these chips. Investors are also rewarding this action.
A Memorable Partnership: Broadcom & Samsung
This played out for custom chip leader Broadcom (AVGO), whose shares moved higher in yesterday's trading session after it signed an agreement with memory chip maker Samsung, wherein the latter will supply memory and foundry chips to the company through 2030 in a deal worth $200 billion.
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A distinction worth noting here is that Broadcom is incorporating Samsung's HBM4 and HBM4E memory chips into its custom AI accelerators. On the other hand, the foundry chips part of the deal simply entails Samsung manufacturing Broadcom's chips through its proprietary 2-nm process.
With this deal, Broadcom has deepened its relationship with Samsung. Rather than chasing multiple suppliers in a market where HBM is fully booked and prices are climbing, with HBM3E contracts reportedly up around 20 percent for 2026, Broadcom made one deep, exclusive style bet on Samsung that bundles memory with foundry and packaging. By anchoring to Samsung, Broadcom secures a credible second source to Taiwan Semiconductor (TSM) and locks in memory in a single stroke while Nvidia (NVDA) leans on SK Hynix (SKHY).
Also, the reason Samsung's supply specifically adds something beyond what SK Hynix alone could provide is a combination of capacity and yield trajectory. Samsung shipped the world's first commercial HBM4 in February 2026, giving Broadcom a second qualified supplier for the highest-performance memory generation at the precise moment its 3.5D platform entered production.
Enviable Financials
Broadcom was always a solid company. However, the past five years have been particularly memorable for it. While revenue and earnings have clocked CAGRs of 24.18% and 43.11%, respectively, the share price has increased seven-fold in the same period. Overall, shareholders have seen the company's market cap expand to $1.823 trillion from just under $200 billion in the last five years.
This year, the stock is up 9.98%, and it offers a dividend yield of 0.66%.
www.barchart.com Notably, Q2 2026 was solid despite peripheral commentary. Net revenue reached $22.187 billion, marking a 48% increase from the year-earlier period. The semiconductor solutions segment, the core chip business, delivered especially strong growth with revenue climbing 79% year-over-year (YOY) to $15 billion. Management anticipates this segment will generate $16 billion in the third quarter, indicating further acceleration. The infrastructure software segment posted more measured growth of 9% YOY to $7.2 billion, coming in slightly under the analyst projection of $7.3 billion.
Earnings per share advanced 54% YOY to $2.44, comfortably topping the consensus estimate of $2.40 and extending the streak of consecutive earnings beats to nine quarters. Operating cash flow remained healthy, rising 60% YOY to $10.5 billion. Broadcom closed the quarter with $19.6 billion in cash, significantly exceeding its short-term debt balance of $2.3 billion.
Nevertheless, AVGO shares continue to command premium valuation multiples relative to the broader sector. The forward price-to-earnings, price-to-sales, and price-to-cash flow ratios of 32.96 times, 17.19 times, and 33.08 times are all above the sector medians of 24.03 times, 3.23 times, and 18.52 times, respectively.
Analyst Opinion On AVGO Stock
Thus, analysts have earmarked a rating of “Strong Buy” for AVGO stock, with a mean target price of $518.66. This denotes a potential upside of 36.9% from current levels. Out of the 41 analysts covering the stock, 32 have a “Strong Buy” rating, three have a “Moderate Buy” rating, and six analysts have a “Hold” rating.
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www.barchart.com On the date of publication, Pathikrit Bose 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. For more information please view the Barchart Disclosure Policy here.
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