11. Broadcom Inc (NASDAQ:AVGO)
Hosking Partners’ Stake Value: $58,198,857
Percentage of Hosking Partners’ 13F Portfolio: 2.15%
Number of Hedge Fund Holders: 130
Broadcom Inc (NASDAQ:AVGO) recently reported a 43% year-over-year increase in second-quarter revenue, with AI revenue surging by 280%. The company’s diverse revenue streams span enterprise, networking, storage, data center/hyperscaler, industrial, and consumer sectors. For 2024, Broadcom has raised its annual revenue guidance to over $51 billion, anticipating growth of more than 40%. A substantial part of this growth is expected to come from software, which will also improve margins.
BofA Securities considers Broadcom Inc. (NASDAQ:AVGO) a top tech stock offering an attractive entry point after the recent market selloff. TD Cowen also highlighted Broadcom as a major beneficiary of increasing AI spending, noting that the company has raised its full-year AI revenue outlook to $11 billion for 2024, with no signs of declining AI demand.
In its recent second-quarter results, Broadcom reported a 43% year-over-year revenue increase, with AI-related revenue surging 280%. The company’s revenue is diversified across sectors like enterprise, networking, storage, data centers, industrial, and consumer markets. Broadcom raised its annual revenue guidance for 2024 to over $51 billion, expecting over 40% growth, driven largely by its expanding software business, which also boosts profit margins.
Broadcom’s Ethernet business remains robust, supported by partnerships with companies like Arista Networks, Dell, Juniper, and Super Micro. The company has also developed custom AI chips in collaboration with Google and Meta Platforms.
As a leading semiconductor company, Broadcom is heavily invested in AI, making it a smart stock pick for investors, particularly with its growth in AI semiconductors and the acquisition of VMware. These factors contributed to the company’s strong second-quarter earnings, and Broadcom is dominating in the market for hyper-scale custom compute and networking chips. With high-profile clients like Google and Meta, Broadcom’s involvement in the AI sector is a key driver of its growth, making it a popular choice among investors.
Hosking Partners also holds NVIDIA’s shares in its portfolio with a c. 0.5% weight but a 3.5% weight in the benchmark and cost the strategy 0.9% following strong results that demonstrated its dominance of the artificial intelligence (AI) space. According to its Quartely Commentary of Q2 2024, Hosking Partners said, “We own Nvidia because its combination of both hardware and software (its Cuda platform) make it likely that it will take the lion’s share of the profit pool from parallel processing, of which generative AI is just one application.”
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“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.”
