10 Best Semiconductor Stocks to Buy for the AI Boom

3. Broadcom Inc (NASDAQ:AVGO)

Number of Hedge Fund Holders: 128

Broadcom Inc (NASDAQ:AVGO), the world’s sixth largest semiconductor company, generates over $30 billion annually and has expanded into software businesses alongside its semiconductor operations. It offers 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets, operating primarily as a fabless designer while manufacturing select products, such as its premium FBAR filters used in Apple iPhones. In software, Broadcom provides virtualization, infrastructure, and security solutions to enterprises, financial institutions, and governments. Formed through major consolidations, Broadcom combines legacy Broadcom and Avago Technologies in semiconductors with Brocade, CA Technologies, and Symantec in software.

Broadcom Inc (NASDAQ:AVGO) reported strong financial results for fiscal year 2024, with consolidated revenue growing 44% year-over-year to a record $51.6 billion. AI revenue grew 220% to $12.2 billion, representing 41% of semiconductor revenue. The company sees a massive AI opportunity over the next 3 years, expecting an AI revenue serviceable addressable market of $60 billion to $90 billion in fiscal 2027 for XPUs and networking from its 3 hyperscale customers. The integration of VMware is largely complete, with VMware revenue on a growth trajectory and operating margin reaching 70% exiting 2024.

Management of Broadcom Inc (NASDAQ:AVGO) provided detailed commentary on its AI opportunity, which is central to the growth story, during the Q4 2024 earnings call. Here is what they said:

“As you know, we currently have 3 hyperscale customers, who have developed their own multi-generational AI XPU Road map to be deployed at varying rates over the next 3 years. In 2027, we believe each of them plans to deploy 1 million XPU clusters across a single fabric. We expect this to represent an AI revenue serviceable addressable market, or SAM, for XPUs and network in the range of $60 billion to $90 billion in fiscal 2027 alone. We are very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion. Keep in mind though, this will not be a linear ramp. We’ll show quarterly variability.”