7. Broadcom Inc. (NASDAQ:AVGO)
Weekly Decline: 15%
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a reputable semiconductor company. It supplies semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide devices and analog III-V-based products. It’s also a leader in the custom ASICs market.
Many investors in AI stocks consider Broadcom Inc. (NASDAQ:AVGO) to be the preferred provider of AI networking solutions. This is primarily because of the company’s Jericho3-AI fabric, which connects up to 32,000 GPUs in high-compute data centers.
An additional plus point for Broadcom Inc. (NASDAQ:AVGO) investors is that it has more diverse revenue streams than other AI players, like Nvidia. Broadcom Inc. (NASDAQ:AVGO) not only offers AI networking solutions but also provides wireless chips and accessories for use in 5G-capable smartphones. Additionally, the company offers optical components and solutions to industrial and automotive companies. Diversification in its business model thus ensures that Broadcom Inc. (NASDAQ:AVGO) rakes in impressive revenues each quarter.
In spite of all this, Broadcom Inc. (NASDAQ:AVGO) has been hit like many other AI stocks this September, primarily because performance does not match up to expectations – regardless of how well the company is actually performing. Investors continue to want more, leading to disappointed hops when these expectations are not being met. Still, Broadcom Inc. (NASDAQ:AVGO) remains a good AI stock to consider picking up.
Broadcom Inc. (NASDAQ:AVGO) was seen in the 13F holdings of 130 hedge funds in the second quarter, with a total stake value of $20.04 billion.
Mar Vista Investment Partners, LLC mentioned Broadcom Inc. (NASDAQ:AVGO) in its second-quarter 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.”
