We recently compiled a list of the 7 Best Semiconductor Stocks to Buy Now. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other semiconductor stocks.
In an updated forecast, The World Semiconductor Trade Statistics (WSTS) revised its 2024 projections upward, expecting a strong 19.0% YoY growth in the broader semiconductor market. The global market value for 2024 is now pegged at $627 billion, demonstrating improvement in performance in Q2 2024 and Q3 2024, mainly in the computing sector. Growth in 2024 is expected to be aided by 2 Integrated Circuit segments- Memory, which can increase by 81.0%, and Logic, which is expected to grow by 16.9%.
Region-wise, the Americas and Asia Pacific are well-placed to lead the recovery, with expected growth rates of 38.9% and 17.5%, respectively.
What Lies Ahead for The Semiconductor Market?
WSTS expects broad-based improvement for the semiconductor market in 2025, with an 11.2% growth, resulting in an estimated $697 billion in global market valuation. This growth is expected off the back of the Logic and Memory sectors, which together are expected to surpass $400 billion in value. This consists of a YoY growth of more than 17% for Logic and 13% for Memory. Notably, other semiconductor categories are projected to grow at more modest, single-digit rates, demonstrating a steady expansion for the broader industry.
WSTS believes that, in 2025, all the regions will be well-placed for continued expansion. The Americas and Asia Pacific regions will maintain their double-digit growth year over year.
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Key Trends Likely to Aid Semiconductor Market in 2025
IDC predicted some critical trends in the semiconductor market. While AI-driven rapid growth continues to be on top of the list, the Asia-Pacific IC (Integrated Circuits) design market will continue to heat up. The memory segment is expected to be aided by the increased penetration of high-end products including HBM3 and HBM3e, which are needed for AI Accelerator, and the new generation of HBM4, which is expected to be rolled out in H2 2025. The non-memory segment is expected to be supported by healthy demand for advanced node ICs for AI servers, high-end mobile phone ICs, and WiFi7.
As per IDC, Asia-Pacific IC design product lines remain rich and diversified. Since inventory levels have been stabilizing, demand for personal devices is picking up, and AI computing continues to extend to a wide range of applications, the overall demand for IC design is expected to increase. Mature nodes (22nm-500nm) continue to have a wide range of applications spanning consumer electronics, industrial control, automotive, and other industry segments. Looking ahead, the demand is anticipated to improve after the correction and oversupply. This is expected to be aided by consumer electronics and periodical inventory replenishment across automotive and industrial control sectors.
Our Methodology
To list the 7 Best Semiconductor Stocks to Buy Now, we used a screener and sifted through several online rankings. After getting an initial list of 12-15 stocks, we chose the ones that were popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with 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: 128
Broadcom Inc. (NASDAQ:AVGO) is a leading global semiconductor company, which is engaged in designing, developing, and supplying a range of semiconductor and infrastructure software solutions. In FY24, Broadcom Inc. (NASDAQ:AVGO)’s semiconductor revenue came at a record $30.1 billion, driven by AI revenue of $12.2 billion. AI revenue, which increased 220% YoY, was fueled by its leading AI XPUs and Ethernet networking portfolio. The fundamentals of the company’s cyclical semiconductor businesses are now stabilizing, with most sectors well-placed for recovery in fiscal year 2025.
The infrastructure software business continues to see positive momentum, with healthy conversions and upsells to its VCF full-stack solution. Broadcom Inc. (NASDAQ:AVGO) has maintained a stable revenue growth trajectory despite fluctuating revenues due to delayed deals. Furthermore, the analysts are optimistic about the company’s expanding Serviceable Addressable Market (SAM). Morgan Stanley upped its price target on the company’s shares from $233.00 to $265.00, giving an “Overweight” rating on 20 December.
Broadcom Inc. (NASDAQ:AVGO) has 3 hyper-scale customers who have developed their own multi-generational AI XPU roadmap to be deployed at different rates during the upcoming 3 years. As per the company’s CEO, in 2027, the company believes each of them plans to deploy 1 million XPU clusters throughout a single fabric. Therefore, Broadcom Inc. (NASDAQ:AVGO) anticipates this to represent an AI revenue SAM (serviceable addressable market) for XPUs and networking of between $60 billion – $90 billion in fiscal 2027.
Overall AVGO ranks 3rd on our list of the best semiconductor stocks to buy now. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
