10 AI Stocks to Watch Amid DeepSeek Impact

3. Broadcom Inc (NASDAQ:AVGO)

Number of Hedge Fund Investors: 128

Oliver Blanchard from The Futurum Group in a latest program on Schwab Network talked about the growth catalysts of Broadcom Inc (NASDAQ:AVGO):

“I think Broadcom is also kind of like a sleeper in this. We don’t really talk about Broadcom enough, but I think they’ve got some plays coming next year, especially with IoT enabled by AI—so mainly smart cameras and smart drones. I think Broadcom is also going to have an advantage there.”

Munro Global Growth Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:

“Broadcom Inc. (NASDAQ:AVGO) contributed 94bps to Fund performance for the quarter. Broadcom is a fabless semiconductor company that designs semiconductors for a range of different industries and applications, based in Palo Alto, California. The company plays an important role in providing semiconductors for AI, specifically, they provide hyperscale data centre companies custom silicon chips. Over time, as companies such as Meta, Alphabet, Amazon and Microsoft build out their AI offering, the critical semiconductor content will come from both custom silicon chips, designed by companies such as Broadcom, and merchant silicon chips, designed by Nvidia. Depending on the use case, or workload, the hyperscaler will use either a custom silicon semiconductor or a merchant silicon semiconductor. Therefore, over time we expect AI processes to be driven by both Nvidia designed chips and custom designed chips from Broadcom and its peers.

On their recent earnings call, Broadcom CEO Hock Tan confirmed that the company’s customers are rapidly pursuing the development of a 1 million XPU cluster of chips. To translate what this means for Broadcom, Hock laid out the Serviceable Addressable Market (SAM) opportunity for the company’s AI revenues over the next 3 years to 2027. In 2024, Hock noted that Broadcom’s SAM was $15-20bn USD, of which the company commanded an approximate 70% share. In 2027, that SAM is expected to grow to $60-90bn USD, and assuming Broadcom captures an approximate 60% share, this gives rise to $50bn USD of AI revenue opportunity for the company over the next 3 years. For the company overall, this means that revenue has the potential to double over the next 3 years. We believe the technology road map outlined by Broadcom and the resulting revenue opportunity gives rise to a multi-year runway of earnings growth backed by a large structural change.”