5. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) designs, develops, and manufactures a wide range of semiconductor components and integrated circuits, as well as software solutions, and is known for its expertise in wireless communications, broadband access, and enterprise storage. It is focused on cloud computing, data centers, networking, broadband, and wireless communications.
The company is exploring AI chip designs with famous tech giants. Its custom chip designs and networking semiconductors are integral to building AI systems. Stacy Rasgon, Bernstein’s semiconductor analyst, acknowledges the company’s strong AI potential, networking and computing power, and attractive valuation. He believes that despite challenges in the core business, its AI focus and strong financial performance make it a compelling investment.
Currently, 130 hedge funds have stakes worth $20.035 billion in Broadcom Inc. (NASDAQ:AVGO). Rajiv Jain’s GQG Partners is the company’s largest shareholder with $32.35 million shares worth $5.2 billion.
In the second quarter, Broadcom Inc. (NASDAQ:AVGO) saw its revenue from AI products hit a record $3.1 billion, which signals a 280% year-over-year growth. The total revenue growth was 42.99%, generating $12.49 billion in revenue. The earnings per share in this period were $1.10.
CEO, Hock Tan, projected that total AI sales for 2024 would exceed $11 billion. Management raised revenue guidance to over $51 billion for this year through strong growth, driven in part by the software revenue. Overall, the company’s Ethernet business is thriving. Partnerships with Arista Networks and other tech giants like Dell, Juniper, and Super Micro are driving growth. Additionally, Broadcom has collaborated with Google and Meta to develop ASIC AI chips. All of these actions position Broadcom Inc (NASDAQ:AVGO) for success.
Mar Vista Investment Partners, LLC stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
