We recently compiled a list of the 10 Best Tech Stocks For Long Term Investment. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against the other tech stocks.
In a recent conversation on December 3, Clare Pleydell-Bouverie from Liontrust Asset Management appeared on CNBC and shared insights on the current state of innovation, particularly in Silicon Valley. She emphasized that the pace of innovation is not only continuing but is accelerating. This rapid evolution necessitates frequent visits to the region to discern which companies are successfully navigating this transition and which are not. Pleydell-Bouverie noted that the clarity regarding these companies is improving quarter by quarter. She expressed a firm belief that the beneficiaries of the new technology cycle, which began about 18 months to 2 years ago with the advent of ChatGPT and the AI Revolution, will differ significantly from those in the previous technology cycle. While established names remain relevant, her focus is increasingly on opportunities beyond the MAG7.
The discussion also touched on market trends for 2025, highlighting a significant focus on AI infrastructure. Pleydell-Bouverie indicated that this year has seen a concentrated effort on building out the necessary compute infrastructure before monetization can occur. This infrastructure encompasses not only silicon but also semiconductor equipment and networking components, which are essential for scaling AI capabilities. She pointed out that while model providers are often viewed as commoditized, there is an ongoing arms race to develop large foundation models. Engineering tools that facilitate the integration of AI into businesses and various applications are also critical, although currently, most value resides within the AI infrastructure layer.
Looking ahead, Pleydell-Bouverie anticipates a shift in focus toward application layers where substantial disruption is expected. Numerous AI startups are targeting established players like Salesforce, indicating a competitive landscape. Despite this shift, she believes that the importance of NVIDIA in AI infrastructure remains strong. She described its role as pivotal, suggesting that it is positioning itself to become the operating system for an emerging landscape of AI-infused software set to launch in the coming year. Pleydell-Bouverie cautioned against viewing the company merely as a chip provider; instead, she argued that understanding its strategic positioning within this technological paradigm shift is crucial for investors.
Her insights reflect a broader narrative about Silicon Valley’s ongoing transformation and its implications for investors looking to navigate this rapidly evolving technological landscape effectively. As tech stocks become increasingly popular, we’re here with a list of the 10 best tech stocks for long-term investment.
Methodology
We first sifted through the stock screeners and internet lists to compile a list of the top mega-cap tech stocks. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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: 128
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor and infrastructure software company. While it’s known for its ASICs (Application-Specific Integrated Circuits), it provides a range of products like cable modems, networking processors, and storage adapters. It serves key markets including data centers, networking, software, broadband, storage, and wireless.
This year, the company launched cutting-edge AI technologies, including the VeloRAIN, an AI-powered security platform, and a private cloud platform for enhanced AI autonomy and security. Driven by strong demand for ethernet networking and custom AI accelerators, the company expects AI revenue to reach $3.5 billion in Q4 2024, contributing to a projected full-year AI revenue of $12 billion.
The company recently announced an advancement in its custom chip technology. Recognizing the surge in demand for GenAI, it has developed 3.5D XDSiP, a solution designed to enhance the speed and performance of custom AI processors. This technological leap is crucial for Broadcom Inc.’s (NASDAQ:AVGO) growing customer base of hyperscalers, who are increasingly relying on custom chips to diversify their supply chains and reduce dependence on expensive NVIDIA processors.
Its focus on developing groundbreaking technologies serves as a key competitive advantage. Broadcom Inc. (NASDAQ:AVGO) is now achieving greater stability and is well-positioned to become a dominant force in the technology landscape.
ClearBridge Investments’ ClearBridge Large Cap Value Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“In IT, we bought Broadcom Inc. (NASDAQ:AVGO) as we believe the company has a long runway for growth with its custom silicon business, which should be more durable and less volatile than other components within the AI food chain. We also believe the acquisition of VMware creates another opportunity for steady, subscription-based durable growth that is still in its early innings. We believe the stock has an attractive risk/reward profile given the reasonable visibility toward mid-teens EPS growth at a low-20s P/E multiple. We made room for Broadcom by exiting Lam Research, whose shares we believed priced in a full recovery, while we grew increasingly concerned that China exposure might create an air pocket.”
Overall AVGO ranks 8th on our list of the best tech stocks for long term investment. As we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
