We recently published a list of The 10 most trending AI stocks in the latest analyst ratings and news. Since Broadcom Inc ( NASDAQ:AVGO ) ranks No. 5 on the list, it deserves a deeper look.
AI shares have pulled back sharply in recent weeks, and analysts believe this is exactly the healthy correction long-term investors have been looking for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said AI stocks have stabilized at levels they could hold for the rest of the year. The analyst said technical indicators now show that AI stocks have moved from overbought territory to oversold territory.
“Now that the positions have been unwound, there is an opportunity for traders to take positions,” Sluymer reportedly said.
Many others agree with Sluymer. Dan Ives of Wedbush reiterated his view that we are still in the early stages of the AI bull market in a recent program on CNBC.
“If you look at what we’ve seen from the AI revolution to the broader technology, it’s been strong from an earnings perspective. And the growth scare that we saw is just a bump in the road to what I believe is the fourth industrial revolution that’s playing out,” Ives said.
For this article, we selected 10 AI stocks that are making waves after their latest earnings, analyst estimates or important industry news. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks in which hedge funds accumulate? The reason is simple: our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy picks 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Broadcom Inc (NASDAQ:AVGO)
Number of hedge fund investors: 130
Stacy Rasgon, Bernstein’s senior U.S. semiconductor analyst, recently told CNBC that he has “always” liked Broadcom and that it is his favorite semiconductor stock pick.
“Broadcom I think has the second best AI story in the (semiconductor) space behind Nvidia.”
Rasgon said the company sells networking and computing power to hyperscalers. This, according to the analyst, has helped the company “cover up some nastiness” in its core business. The analyst said Broadcom’s AI guidance is conservative.
“Higher margin, higher free cash flow in the space and I think the valuation is still really attractive relative to the sector.”
TD Cowen in a new note named Broadcom Inc (NASDAQ:AVGO) as one of the stocks that could benefit from increased AI spending. Analysts at the firm said there is “no sign” of AI generating demand slowing and noted that Broadcom Inc (NASDAQ:AVGO) recently raised its full-year AI outlook. Broadcom Inc (NASDAQ:AVGO) expects AI-related revenue for 2024 at $11 billion.
Broadcom Inc (NASDAQ:AVGO) recently reported its second quarter results. Revenue in the quarter was up about 43% year-over-year. AI revenue in this period grew by 280% year-over-year. Broadcom’s revenue stream is diversified and does not rely on a single source. It includes the enterprise, network, storage, data center/hyperscale, industrial and consumer space. For 2024 AVGO has raised its annual revenue guidance to over $51 billion, forecasting growth of over 40%. A significant portion of this growth is expected to come from software, which would also help margins.
The company’s Ethernet business is also strong amid partnerships with Arista Networks ( ANET ), while the company is also collaborating with Dell ( DELL ), Juniper ( JNPR ) and Super Micro ( SMCI ) in the networking business and other segments. Broadcom has also developed ASIC AI chips in partnership with Google and Meta Platforms.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) at Q2 2024 Investor Letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor software and infrastructure solutions. The company strategically focuses its research and development resources to address unique opportunities in target markets and to leverage its extensive portfolio of US and other patents and other intellectual property to integrate multiple technologies and to designed system-on-chip components and software solutions targeting growth opportunities. Broadcom designs products and software that deliver high performance and deliver mission-critical functions. 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 networks, home connectivity, set-top box broadband access, telecommunications equipment, telephones smart phones and base stations, servers and data center storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its design and high-performance integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We see Broadcom’s semiconductor business as very well positioned to benefit from the secular growth in data center networking, which is 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 support software to its customer base. The recent acquisition of VMware will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for server AI enhancements. Our long-term investment thesis is supported by Broadcom’s success in its strategy to maintain technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.
Overall, Broadcom Inc (NASDAQ:AVGO) is ranked 5th on Insider Monkey’s titled list Top 10 trending AI stocks in the latest analyst ratings and news. While we acknowledge the potential of Broadcom Inc (NASDAQ:AVGO), our conviction lies in the belief that the AI stock has greater promise of delivering higher returns, and doing so over a longer time frame. short. If you’re looking for an AI stock that’s more promising than AVGO but trades at less than 5 times its earnings, check out our report on Cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.