We recently published a list of Top 10 Stocks Market Is Watching Today. In this article, we are going to take a look at where Broadcom Inc (NASDAQ:AVGO) stands against other top stocks market is watching today.
Chris Grisanti, MAI Capital Management chief market strategist, said in a latest program on CNBC that the market is going through a shift towards value stocks from growth stocks.
“A lot of investors miss is that you have to choose a great company, but you also have to choose a great entry price. And the valuation, especially over the last several years, has really gotten out of whack as growth has outperformed value by the most ever that we’ve ever seen. So now we’re just kind of getting back.”
The analyst warned that the latest selloff is not the “healthy correction” we used to see in the past.
“The economically sensitive stocks leading the way down. You’ve got banks that are tanking, you got airlines that are tanking, the worst groups are the financials, the industrial, and the consumer discretionary like retailers. So this is the market saying economic slowdown. Now is it right? You know the old saw about the market predicting eight of the last two recessions—maybe it’s wrong. The problem is one, it’s different this time so people should pay attention, and two, what generally happens is things can fall even on irrational fears, and then they become self-fulfilling.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
For this article we picked 10 stocks Wall Street is currently focusing on. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Funds Investors: 128
Broadcom (NASDAQ:AVGO) is one of the stocks that could boost interest in the artificial intelligence sector in the short term, according to Bank of America.
“We expect strong results from AVGO, MRVL, and CRDO to reignite interest in AI semiconductors, as spending by US cloud customers and AI investments from governments remain the few reliable demand drivers in the global economy,” analyst Vivek Arya said in a client note.
For Broadcom Inc (NASDAQ:AVGO), Arya expects the company to emphasize the long-term addressable market of $60B to $90B for custom accelerator chips and networking.
Broadcom threw it out of the park with its latest quarterly results. The most important part of the report? The company expects strong AI semiconductor sales growth to continue. It sees AI semiconductor revenue of about $4.4 billion in fiscal Q2, which would be a 42% year-over-year growth. Broadcom reported $6 billion in free cash flow for the quarter. Its software business gross margin came in at about 90%. But what’s Broadcom’s moat? It makes ASIC, chips designed for specific applications and tasks. As major companies look for custom chips to break Nvidia’s monopoly and lower costs, Broadcom is positioned well to thrive. Many top AI spenders are teaming up with Broadcom to develop these chips, which are expected to be high-margin, high-volume products, potentially driving substantial growth in both revenue and profits.
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
Bell Global Equities Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
“During December we introduced two new holdings to the portfolio and exited two names. The first addition was Broadcom Inc. (NASDAQ:AVGO), a leading global player in the semiconductor and software industry. We established the position early in December as we saw good potential for earnings upgrades going into 2025. Broadcom’s fundamentals continue to improve and there are many opportunities for them to continue growing double-digit revenue growth and faster profit acceleration. Broadcom has built their industry leading positions through both organic investment and strategic acquisitions. They are also a key player in the booming AI market where they develop custom chips used in data centres which are tailored to specific customer needs and networking infrastructure. Their recent acquisition of VMWare is another good example of how Broadcom can expand their opportunity set into enterprise software and garner strong pricing power from their existing customer base. This adds to their software footprint in mainframe, through CA Technologies, and in cybersecurity following their Symantec acquisition. The strength of their franchise is reflected in the high margins that they earn, which helps them generate a free cashflow margin near 40%. The strong results in mid-December reinforced the strength of the business and we see continued upside for this holding.”
Overall, AVGO ranks 3rd on our list of top stocks market is watching today. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
