We recently compiled a list of the 10 Biggest AI Stories and Ratings Updates You Should Not Miss This Week. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other AI stories.
Are Growing Patents in AI from China a Threat to the US?
China and the United States continue to compete against each other as the AI boom continues to reign in the tech industry. On July 2, Reuters reported that China plans to develop 50 new national and industrial standards for artificial intelligence by 2026. The country aims to standardize systems in the artificial intelligence sector by providing thorough guidelines to companies and budding startups. Furthermore, on July 3, Reuters reported that China filed six times more patents than the United States for inventions in AI like chatbots. On a global scale, more than 50,000 patent applications were filed in the past decade, a quarter of which were filed in 2023 alone. China filed 38,000 generative AI applications between 2014 and 2023, while the United States only filed slightly over 6,200 applications during the same period. Of the total applications, ByteDance, Alibaba Group, and Microsoft filed the largest number of applications. The report added that Chinese patent applications covered a wider range of sectors such as autonomous driving, publishing, and document management. South Korea, Japan, and India were ranked third, fourth, and fifth with the highest number of patent applications.
The United States, on the other hand, has reportedly accumulated $55.6 billion in venture capital funding in the second quarter of 2024, the highest quarterly total in two years. On July 3, Reuters reported that the surge in venture capital funding is driven by developments in artificial intelligence. Such is a 47% increase from the $37.8 billion raised by startups in the first quarter of 2024. Significant investments include $6 billion by Elon Musk’s xAI and $1.1 billion raised by CoreWeave. Previously, venture capital funding took a hit, reporting $35.4 billion in the second quarter of 2023 amid high interest rates and sluggish economic growth. While venture capital and investment in AI are increasing, the IPO market remains sluggish.
OpenAI & Anthropic: A Comparative Analysis
While the threat of Chinese innovations looms over the United States, startups in the country are disrupting the industry with key innovations. OpenAI, the company behind ChatGPT, is a leading artificial intelligence company based in the United States. In February this year, OpenAI closed a deal with venture capital firm Thrive Capital, allowing it to buy some of its shares in a tender offer, bringing its total valuation to $80 billion. This is a threefold increase in its value from a few months ago in 2023.
On June 10, OpenAI and Apple announced a partnership to integrate ChatGPT into iOS, iPadOS, and macOS. Users will now be able to access ChatGPT’s capabilities on all these devices without having to switch tools. Siri will also be able to reach ChatGPT when a user asks a question and will present them with an answer directly from the chatbot. ChatGPT will be integrated into Apple’s writing tools, allowing users to create content when required. The development ensures that user security remains intact. Requests are not stored by OpenAI and IP addresses remain obscured. Users may connect to their ChatGPT account, allowing them to choose their data preferences. The integration will be executed later this year and can be accessed for free without having to create an account.
In another update, Apple is reportedly positioned to join OpenAI’s board. On July 2, Reuters reported that Apple is set to get an observer role on OpenAI’s board, part of the agreement made by the two entities a month ago. Phill Schiller, head of Apple App Store and former marketing chief, was selected for this position. The board agreement will take effect later this year. As of yet, Schiller has not attended any meetings.
Anthropic, OpenAI’s direct competitor, is an artificial intelligence startup founded in 2021. The company is led by Dario and Daniela Amodei as CEO and president. The safety and research company is popular for its safety-oriented language models that produce reliable interpretable, and steerable AI systems. On March 27, CNBC reported that Amazon invested an additional $2.75 billion in the startup, bringing its total investment to $4 billion. Anthropic’s valuation at that time was $18.4 billion and closed five different funding rounds worth $7.3 billion in the past year. Amazon will remain a minority stakeholder in the company. Last year, Alphabet’s Google announced an investment worth $2 billion into Anthropic adding to its $550 million funding from earlier.
Claude is the company’s AI platform able to conduct advanced reasoning, vision analysis, code generation, and multilingual processing. Anthropic recently launched Claude 3.5 Sonner, its first release from the Claude 3.5 family. Claude 2.5 Sonnet has set a new benchmark for graduate-level reasoning, undergraduate-level knowledge, and coding proficiency. The new AI platform operates at twice the speed of Clause Opus. Based on an internal evaluation, Claude 3.5 Sonnet was able to solve 64% of problems. On the contrary, Claude Opus was able to solve only 38% of problems. On July 2, Anthropic announced the launch of a new initiative for a robust third-party evaluation ecosystem. The new initiative will be able to fund evaluations developed by third-party organizations to measure advanced features in AI models. The company strongly believes that the initiative will enhance AI safety level assessments, improve safety metrics, and develop infrastructure and tools for evaluations. The safety level assessments will encompass cybersecurity, chemical, biological, radiological, and nuclear risks, model autonomy, national security risks, and social manipulation.
A lot is going on in the AI space and several companies have emerged as interesting AI stories. We have compiled a list of the most interesting AI stories on Wall Street by studying many reports and publications and watching interviews. The list is sorted in ascending order of hedge fund sentiment, which was sourced from Insider Monkey’s proprietary database that tracks over 900 elite money managers.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician working at a magnified microscope, developing a new integrated circuit.
Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 115
Broadcom Inc. (NASDAQ:AVGO) is one of the best AI stories on our list. The company produces a variety of semiconductor, enterprise software, and security solutions. The company’s AIOps platform includes a suite of products powered by AI and ML. These products help customers derive actionable insights from available data. Users can create customizable dashboards and collaborate across IT domains to make strategic decisions. Broadcom has a strong demand for its AI chips amid the AI boom. The company’s AI products and technologies are backed by its latest 100G/lane VCSEL and EML chips embedded in its first generation of AI networks.
On June 25, Broadcom Inc. (NASDAQ:AVGO) introduced innovations to its VMware Cloud Foundation. The new updates will allow customers to streamline innovation with modern infrastructure and enhanced developer productivity. The flagship cloud platform is also capable of managing artificial intelligence and machine learning workloads at an enterprise level and is more secure and reliable. The VMware Cloud Foundation 5.2 and VMware vSphere Foundation 5.2 will be made available in the fiscal third quarter of 2024.
12% of the company’s growth in revenue in Q2 2024 was driven by AI, which expanded by 280% year-over-year to $3.1 billion. Infrastructure revenue, on the other hand, reached $5.3 billion, up 175% year-over-year. This included $2.7 worth of revenue from VMware, up from $2.1 billion in the previous quarter. As for semiconductors, the company reported strong demand for AI networking and custom accelerators in the second quarter. Networking revenue reached $3.8 billion, up 44% year-over-year. Semiconductor revenue made up 53% of networking revenue.
115 investors were bullish on the stock at the close of Q1 2024, with total stakes amounting to $14.72 billion. Of those, Rajiv Jain’s GQG Partners held the largest stake with a position worth $3.97 billion.
On June 24, BofA Securities reiterated a buy rating on the stock and increased its price target from $2,000 to $2,150.
Here are some comments about Broadcom from ClearBridge Investments Q1 2024 investor letter:
“Among secular growth names, Broadcom Inc. (NASDAQ:AVGO) was another notable addition. Through organic growth and accretive acquisitions, Broadcom has developed into one of the largest global technology providers serving a number of industries with its semiconductor and software products. The company generates high levels of earnings and free cash flow, which will be driven in the coming years by revenue growth and margin expansion due to the acquisition of VMware and strong adoption of the Broadcom’s AI custom silicon chips. The acquisition of VMware is off to a good start and has shifted the business mix to 60% software and 40% semiconductors, enhancing growth prospects while also providing greater downside protection from higher recurring revenue.”
Overall AVGO ranks 8th on our list of the biggest AI stories right now. You can visit 10 Biggest AI Stories and Ratings Updates You Should Not Miss This Week to see the other AI stories that are on hedge funds’ radar. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
