Investors say Broadcom is the AI chip stock worth owning in 2025 | Wilnesh News
Fund manager Stephen Yiu said that as major technology companies seek to reduce their reliance on a single supplier, Broadcom is more likely to bring greater returns to investors in 2025 than artificial intelligence chip leader Nvidia. Yao, portfolio manager of Blue Whale Growth Fund, said that although large technology giants such as Microsoft, Amazon, Google and Meta Platforms have acquired Nvidia’s graphics processing units (GPUs) in large quantities, they are now also developing their own graphics processing units (GPUs). . “Broadcom is not Nvidia, but in terms of performance potential, we expect Broadcom to be the next Nvidia because they work closely with big technology companies,” Yao said Wednesday on CNBC’s Pro Talks show. “Nvidia’s GPUs are very powerful, but they are also very expensive,” Yiu added. “From Microsoft’s perspective, you don’t want to be overly reliant on a single vendor.” AVGO YTD Mountain Broadcom’s shares have soared more than 126% this year, giving it a market value of more than $1 trillion, after the company reported that its artificial intelligence revenue will grow in 2024 More than double that, to $12.2 billion. The stock is one of Blue Whale’s top ten holdings. Broadcom CEO Hock Tan revealed that the company is developing customized artificial intelligence chips with three major cloud computing customers, which analysts identified as Meta, Alphabet and ByteDance. Tan predicts that by 2027, these customers will each deploy 1 million AI chips in network clusters. “It’s a question of potential outperformance,” Yao explained. “We don’t expect Nvidia’s stock price to double in the next two years. From a law of large numbers perspective, this is very difficult.” Wall Street’s View Wall Street analysts are also increasingly optimistic about Broadcom’s prospects. Goldman Sachs raised its price target on the stock to $240 from $190, citing “higher confidence in the company’s future revenue and earnings growth prospects” in a Dec. 15 report. Describing Broadcom as “one of the most compelling ways to play in the AI semifinals over the next two to three years”, analysts at Bernstein noted that “the AI story seems to really be starting to unfold” and they will The price target was raised to $250. However, Bank of America warned that “intense competition with NVDA’s stronghold in commercial chips and enterprise customers” could pose potential risks. Nvidia is still the dominant force in the field of artificial intelligence chips, with a market value of US$3.2 trillion, and its stock price has increased by more than 165% this year. Yao believes Broadcom offers better investment opportunities precisely because of its smaller size. “For a $1 trillion company, growing 50% to $1.5 trillion is reasonable. But for Nvidia, they need to add another $1.5 trillion, which is a very big number,” he said. The shift in spending on artificial intelligence chips comes as major technology companies seek to optimize their huge investments in artificial intelligence infrastructure. Broadcom’s custom chips, called XPUs, unlike Nvidia’s graphics processing units, are designed specifically for each customer’s needs. The company’s growing artificial intelligence business is part of a diverse product portfolio that includes the networking components used to connect thousands of artificial intelligence chips and a major software unit from its recent $69 billion acquisition of VMware. Profit-taking Broadcom is up more than 30% this month alone, which means CNBC’s Investing Club is now more cautious about the stock. Director of Portfolio Analysis Jeff Marks said the club would trim its positions if allowed to do so. “While the market is technically oversold – meaning we are more of a buyer than a seller – we would have sold 100 shares of Broadcom on Monday if we were unrestricted.” “Although we remain bullish on execution Long Hock Tan outlined the long-term AI outlook on the earnings call last week, but our discipline suggests it’s time to ring the register and lock in the stock’s impressive 115% gain this year. We’re downgrading our rating to 2. ,” Max said. —CNBC’s Ari Levy, Ashley Capoot and Michael Bloom contributed reporting.
