Broadcom can 'rotate back' over the next few quarters: Expert

Shares of Broadcom (AVGO) are under pressure after its lackluster sales forecast for the fourth quarter overshadowed its earnings beat. The Futurum Group CEO Daniel Newman joins Morning Brief to dig into the chip company's earnings and its overall outlook amid a heated AI race.
"Clearly, the street wasn't happy. They were looking for some sort of outsized number... But this is a little more of a story about the diversification of the business as well. So the AI business is performing. You're going to have some complicated networking that Broadcom is going to help solve. And of course, these accelerators, these AI processors, Broadcom is in the driver's seat. They have won some really important designs," Newman tells Yahoo Finance.
He notes that while its core business struggled, it's not unique to Broadcom as it's a market-wide macro issue. However, Broadcom's VMware acquisition performed well, which he calls a "really strong play." Newman adds that overall, Broadcom is "a company that was priced well. People thought it was going to maybe have this explosive beat. And the core business has slowed a little bit, but has some favorable conditions to rotate back over these next few quarters."
As the AI race shows no signs of stopping, he believes that there is more opportunity for Broadcom to acquire more hyperscalers: "Our forecast for the chips market is showing that this accelerator market is going to outpace the GPU market by somewhere between 15% and 20% over the next five years... So across the board, we know that these AI accelerators are going to go big."
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