AVGO is undervalued; 64 PEG and 54% margins support a bull case, though Anthropic lending adds concentration risk.

So then you have to ask yourself, you know, if you could get Fair Isaac FICO, which is like taking the opposite end of the Trump trade, you get this for a one peg, do you go to FICO for a one peg or do you go to Broadcom and get like a 7 peg?

uh software. As far as net margins, software and sales, right? As far as net margins at Broadcom were about 14 percentage points higher at about 54%. So you get a cheaper valuation and better margins at a company like Broadcom than you do at FICO.

So, as desirable as that dip is on FICO, I don't know that you want to take the opposite end of that trade.

So, obviously, Broadcom has some concentration risk. You know, there's talk about them lending $40 billion to Anthropic. That just accelerates concentration risk.

But if I divide uh their October 31st EPS into their price right now, they're trading for about 29.8 times. and their forecast growth over the next 4 years is expected to be 45.

So 29 divided by 45 this stock is trading for a 64 peg and it literally has margins of 54%. That's insanity.

54% should justify I mean it's not ARR uh but um probably in the range of like a 27 peg you know I think that's almost reasonable a 27 at these margins these are Nvidia level margin h not quite no they are they're actually Nvidia level net margins yeah they actually have similar to Nvidia level gross margins

So 27 uh or sorry 2.7 times our um forecast EPS of 1167 times the growth rate that we're expecting here which was about 45. You know this could be a $1,400 stock. So that's insane to think about but it shows you how cheap this dog is right now.

Now, it's big in fairness, right? It's a $1.6 trillion company, but it's big for a reason. So, it's actually remarkable. Really? Because Broadcom's 30% cheaper with better margins. It's actually kind of wild.

Is it tightening lending that potentially is going to slow down the artificial intelligence buildout? I mean, we just had Broadcom promise over $40 billion of lending to Anthropic, which of course is circular, right?

The lending goes to Anthropic and then Anthropic spends it on custom spends it on custom chip designs at Broadcom and that does lead to some nervousness in the markets where people were like, I don't know, man, it's too circular, right?