Jefferies’ Top Crowded Semiconductor Long Positions: Top 10 Stocks

3. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders In Q2 2024: 130

Shares Short % Of Outstanding: 1.37%

Broadcom Inc. (NASDAQ:AVGO) is a diversified hardware and software company. It has one of the biggest and most important semiconductor businesses in the industry. Broadcom Inc. (NASDAQ:AVGO)’s connectivity chips are used in gadgets and electronics worldwide which have allowed it to become one of the dominant players in the industry. Its connectivity products also provide Broadcom Inc. (NASDAQ:AVGO) with exposure to the growing data center industry and make it a key player in the AI race. The firm also makes and sells application-specific integrated circuits (ASICs) which can become the industry’s mainstay AI chips in the future. ASICs are chips with user-defined use cases, and word on the street is that big-ticket AI names such as OpenAI have approached the firm to design custom AI chips to reduce reliance on NVIDIA’s powerhouse GPUs. Yet, the growing propensity in the industry towards customer chips could also work against Broadcom Inc. (NASDAQ:AVGO), particularly if Apple decides to move its networking chip requirements in-house.

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.”