We recently published a list of 10 Best Stocks to Buy and Hold For The Next Decade. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other best stocks to buy and hold for the next decade.
Is Nuclear Energy Making a Comeback?
Nuclear plants continue to re-open, but the question stands, will the global supply be able to meet the ever-growing demand for clean energy? On October 1, Aniket Shah, Jefferies’ global head of sustainability and transition strategy, appeared in an interview on Yahoo Finance to discuss his stance on nuclear energy making a comeback amid the AI boom.
Shah shares that the nuclear energy boom is not surprising. Looking back, the United States signed significant partnerships to boost the supply of nuclear energy years ago, indicating that the value this sector holds is not unknown or recent.
He adds that the big tech companies are going to be primary catalysts and will influence the entire market. These companies will invest millions and billions in nuclear energy, making the transition easier for other companies to follow. According to Shah, some key investment areas would be small modular reactors and nuclear fusion.
Shah also acknowledged that the United States held a bipartisan view of the nuclear boom, explaining why regulations and acts in favor of nuclear energy are being passed at notoriously high speeds. While the building blocks of nuclear energy are coming together, Shah remains concerned over the execution. He highlights that the United States does not have enough skilled labor and resources to make the nuclear energy boom a reality and must work extremely hard to make it happen.
Nuclear Energy is Poised for Growth Amid AI Boom
One of the most opportunistic investment themes in 2024 is AI, the other is electrification, and both require a lot of power. The surge in power demand is in turn driving utility stocks. On October 4, Durgesh Chopra, Evercore ISI managing director, appeared in an interview on Yahoo Finance to discuss how utilities could benefit from AI-driven power demand.
Chopra highlights the biggest catalyst for companies like Vistra and Constellation Energy is data centers’ needs for a 24/7 source of clean energy. Therefore, nuclear companies must grab the opportunity and enter into long-term contracts to lock in future growth as soon as possible.
There are multiple projects in the pipeline in the United States, that add up to roughly 1.5 gigawatts of energy, positioning nuclear plants as the next big thing in energy. On the flip side, balancing supply and demand will be a key challenge for companies.
Despite the challenges, he believes that the market is well-positioned for growth in utilities. Utilities have not seen demand growth in the past decade, but things are finally changing for the sector. Overall, with inflation going down, the sector may experience significant tailwinds. Chopra also emphasized that growth in this sector will yield results in five to seven years.
Our Methodology
To come up with the 10 best stocks to buy and hold for the next decade, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 10 based on their hedge fund sentiment at the end of Q2 2024.
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
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor manufacturing company that designs, develops, and supplies semiconductor and software infrastructure products. Some of its products include cable modems, networking processors, and storage adapters.
Broadcom Inc. (NASDAQ:AVGO) is one of the most prominent stocks to buy and hold and we say that because in 2024, the company extended its AI workload to deliver the industry’s first switch platform for scalable AI systems. The company also launched a new technology, Retimers, that helps computers process huge amounts of data for AI tasks. Both these innovations are breakthroughs for AI infrastructure.
In addition to that, Broadcom Inc. (NASDAQ:AVGO) recently partnered with Comcast, and Charter Communications to make chipsets capable of running on high speed. Previously in August, the company launched an on-premise version of its enterprise agility platform. The on-premise version will allow businesses to plan, prioritize, manage, and track activities in real-time.
In the fiscal third quarter of 2024, the company’s revenue was $13.1 billion, up by 47% year-over-year, driven by the growing demand for AI and its cloud platform, VMware. In the fourth quarter of 2024, Broadcom expects revenue from AI to grow by 10% sequentially reaching $3.5 billion, bringing the full-year total to $12 billion.
Overall, Broadcom Inc. (NASDAQ:AVGO) has an upward growth trajectory for the foreseeable future. Such can be attributed to the expanding demand for artificial intelligence and data and storage capabilities.
Aristotle Atlantic Partners mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the firm said:
“Broadcom is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
Overall, AVGO ranks 5th among the 10 stocks to buy and hold for the next decade. 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 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.