By Broadcom Inc (NASDAQ: AVGO) has soared a whopping 140% since early April, yet Jim Cramer insists the artificial intelligence (AI) stock is only “getting cheaper” over time.
The former hedge fund manager made this argument in a recent report to members of his “Investing Club”.
Cramer’s remarks arrive shortly after the customs AI chips (XPUs) specialist posted a solid quarter and issued impressive guidance.
At the time, AVGO management confirmed it had onboarded a new $10 billion long-term customer as well.
According to Cramer, Broadcom stock is now the largest holding in his Charitable Trust.
More importantly, its central role in the AI arms race is unlikely to see the investment account trim its stake in AVGO shares despite their massive surge in 2025, he added.
The math behind Broadcom stock getting cheaper
Cramer’s latest remark on AVGO stock is rooted in rising earnings expectations and a growing AI footprint that’s reshaping how investors value the chipmaker.
Broadcom shares were at $306 in early September – trading at roughly 37x times forward earnings on an EPS estimate of $8.48.
Now, the AI stock may be trading at north of $359 at the time of writing, but its earnings estimates following the blockbuster financial release have also soared to as much as $9.71 in recent sessions.
Therefore, the company’s 2026 price-to-earnings (P/E) multiple now sits at about 36x.
Simply put, Broadcom’s stock price is rising slower than its earnings power – making it “cheaper” on forward basis.
With new customer wins and analyst upgrades pouring in, AVGO shares’ valuation is compressing even as the price climbs – offering what Cramer calls a rare “double win” for long-term investors.
Oracle’s ambitious forecast bodes well for AVGO shares
Oracle recently surprised markets with an ambitious forecast of hitting $144 billion in AI revenue by the end of this decade – up some 8x versus its expectations of $18 billion only in 2025.
According to Hightower’s chief of investments, Stephanie Link, AVGO stock is a direct beneficiary of the investor enthusiasm for AI infrastructure that ORCL’s earnings have reignited.
Much like Cramer, Broadcom shares are Link’s largest position as well, making up roughly 7.0% of her investment portfolio at the time of writing.
“AI inference is obviously going to be the next big driver – and Broadcom is certainly the number one player,” she told CNBC in a recent interview.
Link remains bullish on Broadcom stock despite its massive surge in recent months also because of its diversified revenue mix.
How Wall Street recommends playing Broadcom shares
Investors should note that Wall Street analysts also agree with Cramer and Link’s constructive call on AVGO shares.
The consensus rating on Broadcom stock remains at “buy” with price targets going as high as $420 – indicating potential for another 18% upside from current levels.
Finally, a 0.66% dividend yield and a $10 billion stock repurchase programme for 2025 makes this semiconductor stock all the more attractive to own for the long term.
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