10 AI Stocks You Should Not Ignore

3.  Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders: 156

Broadcom Inc. (NASDAQ:AVGO) is one of the 10 AI Stocks You Should Not Ignore. On September 15, Macquarie initiated the stock with an Outperform rating and $420 price target.

The firm believes that Broadcom is well positioned for artificial intelligence.

“We believe Broadcom should trade at a premium to industry peers with 1) strong growth outlook, 2) a strong ~34% dividend CAGR [compound annual growth rate] in recent years, and 3) long-term strategic planning supported by a unique management incentive plan”

According to the firm, the growth of ASICs, or application-specific integrated circuits, are outpacing GPUs, or graphics processing units. Moreover, Broadcom currently holds a near-monopoly in AI ASIC and cloud networking solutions, with leading positions in Ethernet switching, routing, and SerDes IP.

“Broadcom’s ASIC technology is growing faster than GPU. We expect surging demand for ASIC to outpace GPU growth, driven by adoption among hyperscalers and vertical AI markets (eg, auto, healthcare, financial services),” Lai said. “We estimate a 72% global AI ASIC market CAGR over 2025–28, with Broadcom capturing > 70% market share.”

Meanwhile, the company’s high-margin software expansion is another encouraging aspect for the stock. The firm noted how the chip maker’s operating profit margin increased to 66% from 62% after its VMware acquisition.

“Its software business enhances long-term margin stability, high-quality free cash flow, and re-rate.”

Broadcom is a technology company uniquely positioned in the AI revolution owing to its custom chip offerings and networking assets.