We recently published a list of 10 Best Stocks to Buy for High Returns in 2025. In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against other best stocks to buy for high returns in 2025.
Market Outlook 2025
On December 17, 2024, J.P. Morgan released its market outlook 2025. The report expects the global economy to continue growing at a robust rate, however a sharp slowdown in China is expected. Regarding the equity market, the firm anticipates depressing trends across stocks, sectors, and themes. Analysts at the firm estimate the S&P 500 to be around 6,500 in 2025 with earnings per share of $270. The head of Global Market Research, Hussain Malik noted that the policies of the United States regarding trade, immigration, and regulatory policy will play a critical role in defining the year’s outcome for the country and globally.
The report further elaborated on its anticipation of a depressed stock market by highlighting de-coupling central bank policies, uneven progress in disinflation, and ongoing technological innovation. Moreover, increased geopolitical tensions are also likely to add unusual complexity to the global stock market. Despite all this, the firm has bright expectations for the United States. It believes that the country will remain a key driver of growth due to factors such as an expanding business cycle, a robust labor market, increased capital spending related to AI, and active capital markets. On the other hand, Europe is expected to grapple with structural challenges, while emerging markets may face headwinds from persistent high interest rates, a strong US dollar, and trade policy issues.
Lakos-Bujas, head of Global Markets Strategy at J.P. Morgan warned that a key risk to their base case involves disinflation stalling or reversing, which could prompt the Federal Reserve to consider interest rate hikes later in 2025 or early 2026. Such developments would necessitate a reassessment of their market outlook.
Our Methodology
To curate the list of the 10 best stocks to buy for high returns in 2025, we used Insider Monkey’s third-quarter hedge funds database. We checked the 25 most widely held stocks by hedge funds for 10-year growth rates from Seeking Alpha and ranked these stocks in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? 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)
10-Year Revenue Growth: 28.30%
Number of Hedge Fund Holders: 128
Broadcom Inc. (NASDAQ:AVGO) is a major global technology company that specializes in creating and providing a wide variety of semiconductors and software solutions. The company focuses on creating custom silicon chips that are essential for hyperscale data centers, thereby making it a significant player in the artificial intelligence industry.
The stock railed by more than 97% last year on the back of tailwinds from artificial intelligence. During the fiscal fourth quarter of 2024, Broadcom Inc. (NASDAQ:AVGO) generated $14.05 billion in revenue up 51% year-over-year. Growth was driven by increased demand for its AI accelerators (XPUs) and networking solutions as AI revenue for the same quarter went up by 220% year-over-year. Moreover, the acquisition of VMware has been pivotal for Broadcom, enhancing its capabilities in virtualization and cloud management. Management noted that its infrastructure software revenue grew to $21.5 billion during fiscal 2024, driven by the acquisition.
On January 23, Vijay Rakesh analyst at Mizuho raised his price target on the stock from $245 to $260, while keeping a Buy rating on AVGO. The analyst noted Broadcom Inc. (NASDAQ:AVGO) to be one of his top picks for 2025 as he believes the company will continue to gain strength from its demand for AI custom silicon chips.
Munro Global Growth Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q4 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) contributed 94bps to Fund performance for the quarter. Broadcom is a fabless semiconductor company that designs semiconductors for a range of different industries and applications, based in Palo Alto, California. The company plays an important role in providing semiconductors for AI, specifically, they provide hyperscale data centre companies custom silicon chips. Over time, as companies such as Meta, Alphabet, Amazon and Microsoft build out their AI offering, the critical semiconductor content will come from both custom silicon chips, designed by companies such as Broadcom, and merchant silicon chips, designed by Nvidia. Depending on the use case, or workload, the hyperscaler will use either a custom silicon semiconductor or a merchant silicon semiconductor. Therefore, over time we expect AI processes to be driven by both Nvidia designed chips and custom designed chips from Broadcom and its peers.
On their recent earnings call, Broadcom CEO Hock Tan confirmed that the company’s customers are rapidly pursuing the development of a 1 million XPU cluster of chips. To translate what this means for Broadcom, Hock laid out the Serviceable Addressable Market (SAM) opportunity for the company’s AI revenues over the next 3 years to 2027. In 2024, Hock noted that Broadcom’s SAM was $15-20bn USD, of which the company commanded an approximate 70% share. In 2027, that SAM is expected to grow to $60-90bn USD, and assuming Broadcom captures an approximate 60% share, this gives rise to $50bn USD of AI revenue opportunity for the company over the next 3 years. For the company overall, this means that revenue has the potential to double over the next 3 years. We believe the technology road map outlined by Broadcom and the resulting revenue opportunity gives rise to a multi-year runway of earnings growth backed by a large structural change.”
Overall, AVGO ranks 6th on our list of best stocks to buy for high returns in 2025. While we acknowledge the potential of AVGO to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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.
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Disclosure: None. This article is originally published at Insider Monkey.