We recently compiled a list of the Jim Cramer on Tesla and Other Stocks. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other stocks Jim Cramer is talking about.
Jim Cramer, host of Mad Money, emphasized the ongoing significance of fossil fuels in supporting technological advancements, even as investments in renewable energy continue to increase. He stated:
“This is not just a grudge match between the old and the new, a battle of electric vehicles versus internal combustion. The truth is, fossil fuels are essential for a lot more than vehicles, like it or not.”
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Cramer highlighted the growing energy demands of major tech companies, noting that the data centers they are constructing consume vast amounts of electricity. While these tech giants are making substantial investments in nuclear energy, he pointed out that this power source is unlikely to significantly impact data centers for at least another decade due to the complexities of building nuclear facilities and community resistance to having them nearby.
“If we need more energy, we’re going to get it from what comes out of the ground … fossil fuels that will power the data center, specifically natural gas… You may be reluctant to invest in it, you might think who cares, but you need to know how vital all of this fossil fuel technology is to the growth of the Magnificent Seven.”
Cramer also reflected on the shift in the U.S. energy landscape, recalling how the nation was once heavily reliant on OPEC for oil imports just two decades ago. Today, he pointed out, the U.S. produces over 13 million barrels per day, making it the largest oil producer globally and a net exporter. He mentioned the Permian Basin’s unexpected resilience, continually producing despite earlier predictions of depletion.
Cramer noted that the decline of OPEC has transformed the geopolitical landscape. He referenced the 1973 oil crisis, triggered by OPEC’s retaliation against U.S. support for Israel, which led to stagflation and economic turmoil. In contrast, he pointed out that despite Israel’s current conflict, the U.S. economy is not experiencing stagflation or recession, resulting instead in a bull market. He attributed this stability to the industry, saying:
“… This industry that spent billions upon billions of dollars to try to be as low carbon as possible is the reason why oil prices have actually come down during this period. They’ve gotten so much production that OPEC is now powerless.”
Turning his attention to the broader oil industry, Cramer explored the role of oil service companies that facilitate production, including offshore drillers. He recalled becoming optimistic about oil service stocks earlier in the year, anticipating higher energy prices but admitted that this expectation did not materialize due to economic concerns dampening oil and gas markets. Despite current investor reluctance toward oil service stocks, Cramer suggested that sentiment could shift over time, especially because of the Federal Reserve’s recent rate cutting.
“Now that the FED is our friend and more rate cuts are on the table, that’s good news for the industry. I am not worried about the election either. If Trump wins, maybe we’re back to that “drill baby drill” thing. If Harris wins, we get exactly what we’ve had the last four years. Not ideal for the industry but it’s still led to record oil and gas production here in the United States.”
Our Methodology
For this article, we compiled a list of 14 stocks that were discussed by Jim Cramer during his episodes of Mad Money on October 23 and 24. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
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: 130
Cramer expressed enthusiasm about Broadcom Inc. (NASDAQ:AVGO) and said, “Buy. Charitable Trust name, doing incredibly well… I like Broadcom, I like Hock Tan.”
Broadcom (NASDAQ:AVGO) specializes in the design, development, and supply of semiconductor devices, building on a strong foundation in semiconductor innovation. In the third quarter, the company reported total revenue of $13.1 billion, marking a significant increase of 47% from the same period last year. A contributor to this growth has been the surge in demand for artificial intelligence products and services, which brought in $3.1 billion during the quarter.
Broadcom (NASDAQ:AVGO) expects that AI will become a key driver of growth moving forward, projecting $3.5 billion in AI revenue for the upcoming fourth quarter. The company has found considerable success in providing custom AI accelerators, specialized chips designed to handle AI workloads, to major hyperscale customers such as Microsoft, Amazon, and Alphabet. In the third quarter, sales of these AI accelerators skyrocketed, increasing by three and a half times compared to the previous year.
On October 14, Mizuho raised the price target on the stock to $220 from $190 and maintained an Outperform rating. The firm forecasts tailwinds in artificial intelligence, custom silicon, and networking through 2025 and 2026.
Overall AVGO ranks 1st on our list of stocks Jim Cramer is talking about. 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.