Do You Believe in the Growth Prospects of Broadcom (AVGO)?

Sands Capital, an investment management company, released its “Sands Capital Select Growth Strategy” Q1 2025 investor letter. A copy of the letter can be downloaded here. Select Growth Strategy primarily targets U.S. companies that are leading the way in crucial areas of positive structural transformation within the economy. U.S. growth equities, tracked by the Russell 1000 Growth Index, experienced their poorest quarterly performance since 2022, significantly lagging behind U.S. value equities, represented by the Russell 1000 Value Index, in the widest gap observed since 2001. The strategy slightly underperformed the Russell 1000 Growth Index in the quarter. You can check the fund’s top 5 holdings to know more about its best picks for 2025.

In its first-quarter 2025 investor letter, Sands Capital Select Growth Strategy highlighted stocks such as Broadcom Inc. (NASDAQ:AVGO). Broadcom Inc. (NASDAQ:AVGO) designs and develops various semiconductor and infrastructure software solutions. The one-month return of Broadcom Inc. (NASDAQ:AVGO) was 20.60%, and its shares gained 83.12% of their value over the last 52 weeks. On May 30, 2025, Broadcom Inc. (NASDAQ:AVGO) stock closed at $242.07 per share, with a market capitalization of $1.14 trillion.

Sands Capital Select Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:

“Broadcom Inc. (NASDAQ:AVGO) is a key enabler of systems scalability and compute growth via ethernet networking and custom accelerators. We believe Broadcom will benefit from advancements in AI models in conjunction with increases in computing power, also known as scaling laws. Broadcom supports advances in computing power by providing high bandwidth, low-latency networking solutions. Its solutions help relieve bottlenecks in scaling computing power as an increasing number of semiconductor chips work in parallel for AI training and inference. We expect Broadcom’s ethernet switches used for networking to be the primary driver of incremental growth as it benefits from both share increases and demand for larger server clusters that will require better networking solutions. Complementing its networking business, Broadcom is the largest provider of custom chip design services by revenue. These services enable businesses to take greater control of their technology stack, reduce reliance on third-party suppliers, and optimize costs and energy efficiency.”

A technician working at a magnified microscope, developing a new integrated circuit.

Broadcom Inc. (NASDAQ:AVGO) is in 12th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 158 hedge fund portfolios held Broadcom Inc. (NASDAQ:AVGO) at the end of the first quarter, compared to 161 in the fourth quarter.  While we acknowledge the potential of Broadcom Inc. (NASDAQ: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 timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Broadcom Inc. (NASDAQ:AVGO) and shared the list of AI stocks gaining Wall Street’s attention. Renaissance Large Cap Growth Strategy noted in its Q1 2025 investor letter that Broadcom Inc. (NASDAQ:AVGO) declined in the quarter despite reporting strong operating results. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.