A chip stock that’s been on a tear lately is offering investors a healthy combination of price appreciation and income. Broadcom has been in the shadow of semiconductor giant and artificial intelligence darling Nvidia this year, but December has been kind to the smaller chip company. Broadcom shares are up about 40% this month alone, while Nvidia is down more than 4%. AVGO 1M mountain Broadcom shares over the past month This month’s gains, bolstered by solid fiscal fourth-quarter earnings and a strong outlook tied to AI, have also propelled Broadcom into the league of companies with a trillion-dollar market capitalization . The company reported adjusted earnings of $1.42 per share on revenue of $14.05 billion, while analysts called for earnings of $1.38 per share and $14.09 billion in revenue, per LSEG. Guidance key The real key to the report, however, was the forward financial guidance, according to Charles Gaffney, managing director at Morgan Stanley Investment Management and portfolio manager of the Eaton Vance Dividend Builder Fund (EIUTX) . Broadcom was the second-largest holding in the fund, as of Oct. 31 . Indeed, Broadcom CEO Hock Tan said that the total market for its artificial intelligence chips and components for AI networking could range between $60 billion and $90 billion by 2027. “We see our opportunity over the next three years in AI as massive,” he said on the company’s earnings call, noting that Broadcom is working with three hyperscale customers. Tan said he expects each of these customers will deploy 1 million AI chips in networked clusters by 2027. Tan’s guidance shows that “the runway for opportunities and growth is extremely sizable and strong,” said Gaffney. “That looks like a strong fundamental case that that business should continue to do extremely well over the coming years,” Gaffney added. “And, historically, Broadcom has been a great dividend story.” Dividend grower As evidence, the company hiked its quarterly dividend by 11% to 59 cents a share for the 2025 fiscal year. It marks the 14th consecutive increase in annual dividends since the company initiated the payments in fiscal 2011. “That setup looks very good from a dividend growth perspective,” Gaffney added. “It’s tough to find a quality company that grows its dividend at that clip and maintains a strong secular outlook like they have.” Broadcom’s dividend yield currently stands at 1%, but for tech names – particularly those that have just started issuing payments this year – the key is to provide sustainable dividends and grow them over time. This ultimately rewards long-term investors who buy and hold shares, especially if they reinvest the dividend. “The AI theme is becoming more of a secular growth story in the marketplace,” Gaffney said. “[Broadcom] is one of the names in the tech space that gives you the best of both worlds that you’re seeing here: great capital appreciation, and it offers a dividend and dividend growth.” — CNBC’s Kif Leswing contributed reporting.
