The bidding war took place between Nvidia and Intel Corp. (INTC) suggests the appetite clearly moves beyond simply one company.
As the sector heats up, it's fair to assume more than just these two leaders will look to compete in the sector's arms race to integrate.
Broadcom a Buyer?
"[We] have done quite a [lot] of acquisitions [of] very strong assets in the semiconductor space, and it's obviously something we continue to look at because obviously semiconductor is a core area for us," CEO Hock Tan said when asked about such aspirations.
The company has not been shy about acquisitions in the past.
The San Jose-based chip company most recently completed a massive $18.9 billion deal for systems and applications software giant CA Technologies, a subject of focus for Tan on recent earnings call.
As many will recall, the announcement of the acquisition for the lofty price tag led to a nearly 20% drop Broadcom's share price. Investors bold enough to have had faith in Tan's tie-in amidst the drop would have made nearly $100 per share in profit after today's run.
Of course, the largest splash the company attempted, but failed to make, was its blockbuster $140 billion bid for Qualcomm Inc. (QCOM) . The deal was eventually squashed by President Trump on the grounds the company, which was based in Singapore at the time, presented a threat as a foreign actor.
Overall, the preponderance of evidence would suggest that Broadcom is far from adverse to shelling out the big bucks for blockbuster M&A.
The time could be right for Broadcom as well given its enviable cash position that could enable a potential acquisition of an IoT player like NXP Semiconductors N.V. (NXPI) , or smaller software players like the KKR-owned BMC software.
Free cash flow grew 39% from last year to more than $2 billion, helping sustain an aggressive share repurchase and dividend payment program.
To be sure, the large figures shelled out in the past do not mean Broadcom will leap at every opportunity.
"If you have observed our behavior over the last several years, we tend to do it on a measured pace simply because it's important. In fact, it's critical on any acquisition we make that we can integrate it very, very well," Tan clarified. "That's what we're doing with CA right now and we're right in the thick of it as you notice in the numbers we are going through as we drive down to generate the kind of business model we expect to get out of CA."
In any event, analysts feel confident Broadcom can continue to consolidate successfully, contrasting with the sentiment felt upon the announcement of the CA Technologies deal.
"We believe Broadcom's strong track record of successful acquisitions will provide a meaningful diversification opportunity and long-term growth stability given that the smartphone market continues to saturate at the high end," Keybanc analyst John Vinh said. "We expect the Company to remain acquisitive and continue to consolidate the industry. We expect accretive acquisitions will continue to support outsized earnings growth vs. its industry peers."
He raised his price target to $310 per share from $280 given his expectation that Broadcom will continue to be a semiconductor sector leader, bolstered by its buyout capability.