Broadcom is a top buy due to its low valuation (PEG < 0.7) relative to strong growth and dominance.

We have an artificial intelligence behemoth in fifth place, the semiconductor and infrastructure software giant Broadcom, ticker symbol “AVGO”, in which Saudi Arabia significantly increased its stake last quarter, nearly doubling its position, by purchasing more than $50 million in additional shares.

And yes, this is easily my favorite. Once a tech giant builds its entire data center infrastructure around its own custom Broadcom chips and networking equipment, the conversion costs can be extremely high, and therefore, I think this provides them with an economic moat and a greater barrier to entry.

Add to that a leading position in artificial intelligence networks, high-margin enterprise software, and even many cybersecurity offerings that continue to be in demand as the world’s technology advances. The result is a stunning performance.

In the last quarter, for example, sales rose 86% year-on-year to nearly 30 billion, while adjusted operating income increased by an even greater 92% to exceed 20 billion, with about 14 billion of that going directly into free cash flow.

We are talking about huge profit margins, largely thanks to the growing demand for artificial intelligence, with their AI chip division, for example, experiencing explosive growth of 220%.

Due to some minor obstacles, including delayed guidance and a slight decrease in profit margins as a result of higher memory component costs, the market punished the stock with a loss of about 30% from its highs.

This left the price-to-earnings-to-growth (PEG) ratio below 0.7, which is more than 40% lower than the sector average. I think this is a crazy assessment of this level of growth, dominance, and performance.

It gets even crazier when you look at their roadmap for the next four years, where the CEO expects AI semiconductor revenues to reach $115 billion by 2027, then double again to $230 billion by 2028, with earnings per share expected to reach $30. I mean, this is crazy.

Now, the pessimistic view is that if we are in an AI bubble right now, all of this could collapse in the future if that bubble bursts. At that point, I think the whole market will collapse anyway, because it really seems that everything these days is built and valued on the basis of artificial intelligence.

So, I'm still buying stocks regardless, because I think the stock is surprisingly cheap compared to what you'll get in return. Yes, this stock easily occupies the top spot, so I will move all other stocks one place down to make room for it.

But for me personally, the only company I actively buy today is Broadcom, which I admire the most.