9. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 161
Average Upside Potential as of April 23: 39.21%
Broadcom Inc. (NASDAQ:AVGO) specializes in various semiconductor devices with a focus on complex digital and mixed-signal complementary metal oxide semiconductor-based devices and analog III-V-based products. Its products are used in many enterprise and data center networking applications, like AI networking and connectivity, home connectivity, and broadband access.
On April 22, Barclays analyst Tom O’Malley lowered the price target on the stock to $215 from $260, while keeping an Overweight rating. The price target adjustment came from Barclays’ updates on semiconductor and semiconductor capital equipment models to reflect tariffs and the trade war ahead of Q1 2025 earnings. However, Broadcom exceeded January quarter estimates and provided strong April quarter projections.
In March, the company announced that it is expanding its optical interconnect solutions to support AI infrastructure. Broadcom Inc. (NASDAQ:AVGO) introduced new innovative technologies, like the advancements in co-packaged optics (CPO), 200G/lane DSP and SerDes, 400G optics, and PCIe Gen6 over optics. These solutions are designed to help grow and scale AI clusters as well as meet the growing demands of AI workloads.
Mar Vista US Quality Select Strategy is highly positive on the company and stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:
“We maintain a positive outlook on Broadcom Inc. (NASDAQ:AVGO) shares, despite recent stock price pressure stemming from two key concerns: (1) uncertainty around potential tariffs and the impact on global growth, and (2) investor skepticism regarding the return profile of large-scale AI capex investments by hyperscalers. This skepticism has been amplified by the efficiency gains recently demonstrated by DeepSeek, an unknown Chinese software company, which developed a competitive large language model at a much lower cost. These efficiency gains stoked fears that hyperscalers may have overbuilt AI infrastructure.
Broadcom maintains a strong competitive position in the custom AI ASIC market, as well as a disciplined capital allocation, most recently reflected in the VMWare acquisition. That deal is already delivering better than-expected top-line growth and margin expansion. Broadcom is the leading provider of custom AI ASICs and has been steadily diversifying its customer base beyond its initial anchor client, Alphabet. Many hyperscalers are interested in developing custom ASICs, which are tailored to specific computing tasks, given their lower costs and attractive performance attributes relative to general-purpose GPUs from providers like NVIDIA.
While we remain constructive on Broadcom’s long-term prospects, we did trim our position earlier in the quarter at higher levels to reallocate capital toward a more favorable risk-reward opportunity. Nonetheless, Broadcom remains a core holding in our portfolio and offers an attractive margin of safety. We believe the company is well-positioned to grow intrinsic value by +20% over the intermediate term.”
