We recently published a list of Top 10 AI News You Shouldn’t Miss. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against other top AI news you shouldn’t miss.
All everyone could talk about in the technical AI landscape these days is DeepSeek-R1, a Chinese open-source LLM that analysts believe can give major American AI companies a run for their money. Why is DeepSeek making waves and why is it called a breakthrough in the AI race?
DeepSeek AI model is several times cheaper to use for professional purposes when compared to its American counterparts including OpenAI’s o1 model. Media reports also suggest the model beat almost all key AI models in the industry by significant margins.
CNBC’s Deirdre Bosa explained what makes these Chinese models a challenge for US tech companies:
“The cost, I mean, these models coming out of China are just built at a fraction of the price when you think about OpenAI. That’s spending $5 billion a year, burning through billions of dollars a year. These models, the DeepSeek for example, they say they built it for less than $6 million. ByteDance as well, you know, shows that it was built and you can access it at much, much lower prices. So, this really turns on sort of this truth that we have thought about generative AI for the last few years—that you need hundreds of millions of dollars to develop bigger and better models. What the Chinese labs and companies are doing is they’re going straight to the frontier. They’re building with sort of infrastructure and outputs that are already out there, built in many cases by American companies and startups, and they’re improving on it, they’re innovating on it, and producing models that are just as good, in some cases, at a fraction of the cost.”
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For this article, we picked 10 AI stocks currently in the news. With each company 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors: 128
Evercore ISI recently said the market is expected to experience more of what it saw in 2024, with the investment firm expressing a positive outlook for Information Technology in 2025, calling it “Fill IT up again.”
The firm emphasized that “the bull market in the S&P remains strong” and expects “another 22% upside to 7,200 in 2025.” Currently, the benchmark index stands at 5,940 as the new year begins.
Backing its optimistic view is the Information Technology sector, with Evercore ISI predicting tech will once again lead the market higher. Within the sector, both semiconductors and software were highlighted.
On semiconductors, the firm stated, “semis are coiled for a major move higher,” pointing to high-conviction positions including Broadcom Inc. (NASDAQ:AVGO).
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.
However, the stock could face the impact of what Nvidia is facing today: too high expectations.
In the latest quarterly results, Broadcom Inc. (NASDAQ:AVGO) revenue was largely in line with estimates. The company has narrowly exceeded revenue expectations by less than 5% in most cases. Some analysts suggest Broadcom’s growth rates will moderate to below 20% CAGR starting the first quarter of 2025. In fiscal Q4, it was +50% topline growth. The market won’t be kind to the stock when the revenue growth rate slows. Broadcom has about $58 billion in net debt, which is relatively high.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“Similar to the earnings results for Nvidia, shares of Broadcom Inc. (NASDAQ:AVGO) initially sold off after the company reported solid earnings that fell light of elevated market expectations, but the stock did recover from its drawdown in the matter of a few weeks. With an enticing combination of custom chip offerings as well as networking assets, Broadcom remains one of the best positioned companies as part of the AI revolution. Broadcom outlined a path to derive a majority of its revenue from the AI end market within a couple of years, and the non-AI part of the business has stabilized after a deep correction. The company’s dominant market position in its end markets, along with durable growth, strong margins and best-in-class capital allocation, presents an opportunity to compound capital over time.”
Overall, AVGO ranks 4th on our list of top AI news you shouldn’t miss. While we acknowledge the potential of AVGO, 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.
