We recently published a list of Billionaire Ken Fisher’s 10 Favorite AI Stocks for the Rest of 2024. Since Broadcom Inc (NASDAQ:AVGO) ranks 8th on the list, it deserves a deeper look.
Billionaire Ken Fisher regularly shares his investing wisdom on his YouTube channel, sharing market insights and lessons he’s learned over the decades. Commenting about the Fed’s rate cut, Fisher recently advised investors not to focus on what the central bank is doing and instead pay attention to long-term investing.
“The fact is, and I’ve said this for a long time, I won’t live forever, but I hope to live a long time and keep saying it: central bankers are crazy. Throughout my life, central banks have operated on flawed ideas and groupthink, which is an inefficient way to manage markets.”
Fisher gave an example of how you could end up losing money following the herd mentality when it comes to central bank moves.
“If you had followed the common belief that when the Fed and other central banks hike rates, you should get out of stocks, that would have worked for a couple of months in 2022. By the middle of the summer of 2022, during the height of rate hikes, you would have been on the wrong side of the market. From June 2022 onward, as the Fed hiked rates by 75 basis points nearly every month, the market was just a few months away from rising, leading to the bull market we’re in now, in 2024.
The basic belief that central bank hikes are bad for stocks was wrong from the start because it was already priced in. As soon as central bank hikes were visible, the market had already accounted for them. We saw a bull market begin in October 2022, which has continued despite repeated rate hikes.”
For this article, we scanned Ken Fisher’s hedge fund’s Q2 holdings and picked its top AI investments. We have analyzed the AI-related growth catalysts for each stock. 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).
Photo by Christian Wiediger on Unsplash
Broadcom Inc (NASDAQ:AVGO)
Billionaire Ken Fisher’s Stake: $3,619,968,667
Broadcom Inc (NASDAQ:AVGO) recently posted quarterly results and while they beat estimates on both EPS and revenue, guidance failed to impress the Street, resulting in a share price decline. However, Jefferies said the dip was a buying opportunity.
“Guidance came in a bit lighter than expected, but management has been messaging lumpiness in AI revenue and growth is set to reaccelerate in 4Q,” said Jefferies analyst Blayne Curtis, in a note. “The cyclical correction in non-AI revenue is in-line with peers, and our view is the long-term trend in AI still favors an industry shift to custom ASICs, where Broadcom Inc (NASDAQ:AVGO) remains well-positioned. Factor in the added benefit of the VMware acquisition running ahead of schedule on both revenue and earnings, and it’s easy to look past one minor bump in the road.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. The company expects about $12 billion in AI revenue in fiscal 2024, which means 20% of its total revenue will come from AI and counting.
Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
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.
Baron Opportunity Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
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Disclosure: None. This article is originally published at Insider Monkey.
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