Amid the artificial intelligence (AI)rush, 2023 was a record-breaking year for tech stocks. Investors are now perpetually on the lookout for growth stocks that promise robust returns in the dynamic world of technology.

Two heavyweights in the semiconductor industry, Qualcomm (QCOM) and Broadcom (AVGO), have consistently been on the radar of investors seeking long-term growth. Qualcomm’s stock gained 35% last year, while Broadcom’s stock surged 102%, outperforming the tech-heavy NASDAQ Composite’s ($NASX) gain of 44.5%.

As the technology and AI landscape evolves, understanding each company's strengths and weaknesses is crucial for picking out the right growth stock to buy for 2024.

The Case For Qualcomm Stock: The Wireless Communication Titan

Qualcomm Incorporated, specializing in wireless communication technologies, has been a dominant player in the industry for decades. Known for its innovations in mobile processors, modems, and other chipsets, Qualcomm has positioned itself at the center of the 5G revolution. The company's Snapdragon processors not only power a significant portion of smartphones globally, but also tablets, wearables, and automotive systems, generating a steady revenue stream for the company.

Last year, macroeconomic pressures, such as rising inflation, restricted consumer spending on electronics, which impacted smartphone sales. This resulted in Qualcomm’s Q4 fiscal 2023 revenue falling 24% year-over-year to $8.7 billion, while earnings declined 35% to $2.02 per share.

Beyond mobile, Qualcomm has expanded its portfolio to include automotive, IoT (Internet of Things), and networking solutions. In fiscal 2023, handset chip sales fell 22%, while IoT chip sales dropped 19.2% year on year. However, automotive chip sales increased by 24.1% from fiscal 2022. 

Qualcomm also pays a dividend, and the stock currently yields 2.28% - more than the tech sector average of 1.37%. Its dividend payout ratio of 36% indicates that there is room for dividend growth if earnings continue to rise. 

One downside is the company’s heavy reliance on the mobile device market, which is cyclical. As seen in 2023, a continued significant slowdown in smartphone sales could challenge Qualcomm's growth prospects.

Nonetheless, a recovery in the smartphone market this year has the potential to reverse Qualcomm's fortunes. The company is set to report Q1 fiscal 2025 results on Jan. 31. Furthermore, Qualcomm also expanded its AI capabilities by introducing the Snapdragon X Elite for personal computers and the Snapdragon 8 Gen 3 for smartphones.

For the first quarter of fiscal 2024, management expects revenue to range between $9.1 and $9.9 billion, with earnings per share arriving between $2.25 and $2.45. Meanwhile, analysts expect EPS of $2.37 on revenue of $9.49 billion. 

For the full fiscal year 2024, analysts expect revenue to increase by 5.6% to $37.83 billion, along with 9.04% year-over-year growth in earnings to $9.19 per share. Qualcomm stock trades at 15 times forward 2024 earnings, which is lower than its five-year historical price-to-earnings average ratio of 23. 

What Do Analysts Say About Qualcomm?

Recently, Citi analyst Christopher Danely upgraded QCOM to “buy” from "hold," and increased the stock's target price to $160. The analyst predicts that a recovery in the handset market will add to Qualcomm's future revenue and margins.

Overall, Wall Street has assigned a “moderate buy” rating to Qualcomm. Out of the 23 analysts covering the stock, 15 rate it a “strong buy,” seven rate it a “hold,” and one rates it a “strong sell.” Qualcomm is trading nearly flat with its average target price of $139.14. However, its high target price of $173 implies a 23.4% upside from current levels.

The Case for Broadcom Stock: The Diversified Technology Giant

Broadcom is a global technology company known for its diverse product portfolio, which includes semiconductors, infrastructure software, and semiconductor software. Broadcom's stock has returned a staggering 1,927% over the past decade. 

The company's revenue has increased from $6.9 billion in fiscal 2015 to $35.8 billion in fiscal 2023. Meanwhile, its earnings per share over the same period have increased from $8.98 to $32.98, showcasing the magnitude of its growth.

In fiscal 2023, Broadcom's Semiconductor Solutions segment accounted for 79% of total revenue. While semiconductor revenue increased by 9%, infrastructure software revenue increased by 3% in fiscal 2023.

To accelerate growth and broaden its AI capabilities in the infrastructure software segment, which currently accounts for just 21% of total revenue, it acquired enterprise software companies Symantec's Enterprise Security Business and CA Technologies.

Despite macroeconomic headwinds, Broadcom's diverse business enabled an 8% year-over-year jump in revenue to $35.8 billion in fiscal 2023. Earnings per share also increased to $42.25 from $37.64 in the year-ago quarter.

To diversify its business from semiconductors to cloud computing, it paid $61 billion in cash and stock for cloud software company VMware last year. Broadcom expects this strategic deal to contribute 49% of infrastructure software revenue and $8.5 billion in pro forma EBITDA (earnings before interest, tax, depreciation, and amortization) over the next three years.

For fiscal 2024, management forecasts revenue of $50 billion, a drastic jump of 40% year-over-year, with adjusted EBITDA potentially accounting for 60% of projected revenue. Meanwhile, analysts predict revenue growth of 39% to $49.7 billion, with earnings growth of 11% to $46.92 per share.

Broadcom also pays a dividend, yielding 1.9%, with a payout ratio of 37%. The company ended the fiscal year with $14 billion in cash and cash equivalents. It also generated $17.6 billion in free cash flow during the fiscal year, which should aid in strategic AI investments and acquisitions, debt repayment, and dividend payments.

Looking ahead, analysts predict that Broadcom's earnings will increase by 18% in fiscal 2025. AVGO is trading at 19 times forward 2025 earnings, which appears reasonable when compared to its semiconductor industry peers.

What Do Analysts Say About Broadcom?

On average, Wall Street rates Broadcom stock as a “strong buy.” Out of the 22 analysts covering the stock, 18 have a “strong buy” rating, while four recommend a “hold.” Broadcom isn't trading too far below its average target price of $1,106.70, but its high target price of $1,250 implies a potential upside of 13.4% in the next 12 months.

Which Semi Stock Is the Better Pick in 2024?

To summarize, Qualcomm's dominance in 5G technology and Broadcom's diversified portfolio, along with AI-led growth, both present compelling investment cases. While both Qualcomm and Broadcom are excellent long-term growth stocks, if I had to pick one, I would choose Broadcom.

Broadcom's strength lies in its diverse product portfolio and ability to provide comprehensive solutions across multiple sectors. The company’s outstanding AI-integrated product portfolio and strategic acquisitions place it in a much better position to drive exceptional growth in the coming years, making it the better stock pick for 2024.