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 (NASDAQ: AVGO) 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.
Should you invest $1,000 in Broadcom right now?
Before you buy stock in Broadcom, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,404!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 9, 2024
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.
If You Bought 1 Share of Broadcom at Its IPO, Here's How Many Shares You Would Own Now was originally published by The Motley Fool