BofA’s List Of AI & Semiconductor Stocks That Fund Managers Love & Hate: 16 Stocks On The Manager Radar

2. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders In Q2 2024: 130

Section: Gaining Popularity

Broadcom Inc. (NASDAQ:AVGO) is a diversified technology company with a presence in the semiconductor and SaaS industries. It has exposure to the semiconductor industry via modems, network controllers, network processors, and application-specific integrated circuits (ASICs). These allow Broadcom Inc. (NASDAQ:AVGO) products to operate in the smartphone, laptop, and data center industries. The firm also benefits from its ASIC business as it allows it to. work with companies interested in designing their custom AI chips. Consequently, Broadcom Inc. (NASDAQ:AVGO)  has a wide semiconductor moat which allows it to profit from several industries. Its cybersecurity business adds margin-heavy revenue to the income statement, making Broadcom Inc. (NASDAQ:AVGO) one of the most well-rounded firms in the world. However, with Apple’s propensity to shift to its in-house chips, the firm could see headwinds in the future if Apple decides to self-design and make chips such as MacBook WiFi modules.

Baron Funds mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the fund said:

“Broadcom Inc. is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”