We recently published a list of Top 10 AI stocks according to the latest ratings and analyst news. Since Broadcom Inc (NASDAQ:AVGO) ranks 5th on the list, it deserves a deeper look.
AI shares have fallen significantly over the past few weeks, and analysts believe this is exactly the healthy correction that long-term investors have been looking for. According to Bloomberg, Rob Slaymer, technical strategist at RBC Wealth Management, said AI shares have stabilized at levels they can sustain for the rest of the year. The analyst said technical indicators now indicate that AI stock has moved from overbought territory to oversold territory.
“Now that the positions have been cancelled, there is an opportunity for traders to take positions,” Sleimer said.
Many others agree with Sluymer. Wedbush’s Dan Ives reiterated his view that we’re still in the early stages of an AI bull market on the latest CNBC program.
“If you look at what we’ve seen from the AI revolution to broader technology, it’s been strong from an earnings perspective. And the growth scare that we’ve seen is just a bump in the road to what I believe is the fourth industrial revolution playing out,” Ives said.
For this article, we’ve selected 10 AI stocks that are making waves based on recent earnings, analyst ratings or important industry news. For each company, we mentioned the number of hedge fund investors. Why do we care about the stocks that hedge funds accumulate? The reason is simple: our research has shown that we can beat the market by mimicking the best stocks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- 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
Stacey Rasgon, senior semiconductor analyst at Bernstein US, recently said while speaking to CNBC that he has “always” liked Broadcom and it is his favorite semiconductor stock pick.
“I think Broadcom has the second best AI story in (semiconductors) behind Nvidia.”
Rasgon said the company sells networking and computing power to hyperscalers. This, according to the analyst, has helped the company “hide some nastiness” in its core business. The analyst said Broadcom’s AI guidance was conservative.
“Highest margin, highest 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 pointed to Broadcom Inc (NASDAQ:AVGO) as one of the stocks that could benefit from rising AI spending. Analysts at the firm said there was “no sign” of generative AI demand slowing and noted that Broadcom Inc (NASDAQ: AVGO ) recently raised its full-year AI outlook. Broadcom Inc (NASDAQ:AVGO) expects 2024 AI revenue of $11 billion.
Broadcom Inc (NASDAQ:AVGO) recently reported second quarter results. Revenue in the quarter was up about 43% year-over-year. AI revenue during the period increased by a whopping 280% year-over-year. Broadcom’s revenue stream is diverse and does not rely on a single source. Includes enterprise, networking, storage, data center/hyperscaler, industrial and consumer space. For 2024, AVGO increased its annual revenue guidance to more than $51 billion, expecting growth of more than 40%. A significant portion of this growth is expected to come from software, which will also help margins.
The company’s Ethernet business is also strong on the back of partnerships with Arista Networks ( ANET ), while the company also collaborates with Dell ( DELL ), Juniper ( JNPR ) and Super Micro ( SMCI ) in the networking business and other segments. Broadcom 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) in its Q2 2024 Investor Letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and delivers a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverages its broad portfolio of US and other patents and other intellectual property to integrate multiple technologies and create system components on a chip and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and deliver critical functionality. 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 networks and data centers, home connectivity, “broadband set-top boxes”, telecommunications equipment, smartphones and base stations, servers and storage systems of data centers, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its highly efficient design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We think Broadcom’s semiconductor business is very well positioned to benefit from the secular growth in data center networking that is being 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 critical mainframe 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 upgrading AI servers. Our long-term investment case is supported by Broadcom’s success in its strategy to maintain technology leadership and market share in mission-critical, high-switching, high-profit markets.”
Overall, Broadcom Inc (NASDAQ:AVGO) ranks #5 on Insider Monkey’s list titled Top 10 AI stocks according to the latest ratings and analyst news. While we recognize the potential of Broadcom Inc (NASDAQ:AVGO), our belief is based on the belief that the AI stock holds greater promise for delivering higher returns, and within a shorter timeframe. If you’re looking for AI stocks that are more promising than AVGO but trade at less than 5x earnings, check out our report on cheapest AI stocks.
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Disclosure: None. This article was originally published on Insider Monkey.