6) Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Short % of Shares Outstanding (August 15, 2024): 1.09%
Broadcom Inc. (NASDAQ:AVGO) offers semiconductor products. It provides cable modems, filter amplifiers, networking processors, storage adapters, motion control encoders, optocouplers, and other related products.
The boom in data center construction, as there is a pressing need to harness power for several Al applications, should continue to benefit Broadcom Inc. (NASDAQ:AVGO). It continues to see elevated demand for its high-performance connectivity solutions and server storage products. This trend is reflected in its 2Q 2024 results, with revenue from Al products surpassing ~$3 billion. Apart from this, the company’s results were supported by the increased adoption of VMware cloud software stack solutions.
In its 2Q 2024 results, the company highlighted that its infrastructure software revenue accelerated, with more enterprises adopting its VMware software stack to develop their own private clouds.
Moving forward, Broadcom Inc. (NASDAQ:AVGO)’s potential for revenue and earnings growth stems from the intangible assets in chip design along with switching costs for software products. It offers diversified investment opportunities across both semiconductor and software. The company’s Al opportunity appears to be broad and spans across networking and computing. The integration of VMware product SKUs, together with a simplified go-to-market strategy, continued to support its 2Q 2024 results. The company signed up ~3,000 of its top 10,000 customers for VMware products.
Broadcom Inc. (NASDAQ: AVGO) raised its FY 2024 guidance for consolidated revenue to $51 billion and adjusted EBITDA to 61% of its revenues. Analysts at Truist Financial increased their price target on shares of the company from $156.60 to $204.50. They gave a “Buy” rating on 13th June.
Mar Vista Investment Partners, LLC, an investment management company, released second quarter 2024 investor letter. Here is what the fund said:
“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.”
