2. Broadcom Inc. (NASDAQ:AVGO)
Revenue Growth: 42.99%
Number of Hedge Fund Investors In Q2 2024: 130
Broadcom Inc. (NASDAQ:AVGO) is one of the biggest technology companies in the industry. Its presence stretches from the lucrative semiconductor design industry which is seeing tailwinds due to a shortage of AI GPUs to the cybersecurity industry which benefits from stable recurring revenues. Broadcom Inc. (NASDAQ:AVGO) could emerge as a key player in the AI race, as rumors in the industry suggest that OpenAI is working with it to design a new AI chip that could serve as an alternative to NVIDIA’s GPUs. The firm also enjoys a dominant position in the smartphone industry through its modems, as well as being the supplier of WiFi and Bluetooth chips to Apple. This places Broadcom Inc. (NASDAQ:AVGO) in a lucrative position that allows it to earn sizeable revenue. However, at the same time, the Apple partnership also leaves it vulnerable because of the firm’s tendency to design its own chips. Nevertheless, Broadcom Inc. (NASDAQ:AVGO benefits from business diversification, particularly as its software division allows it to earn recurring revenue. The firm’s position in the AI ecosystem also led to Broadcom Inc. (NASDAQ:AVGO)’s shares falling by 10% after its third quarter earnings report guided $14 billion in fourth quarter product revenue, which was lower than $14.11 billion that analysts were expecting.
Aristotle Atlantic Partners mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the firm said:
“Broadcom is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
