Broadcom's AI Surge: Potential to Rival Nvidia in Semiconductor Market

Where Will Broadcom Stock Be in 3 Years? | The Motley Fool

Broadcom (AVGO 3.15%) has been an outstanding investment over the past three years, as shares of the semiconductor giant have shot up an impressive 240% during this time and outpaced the 27% gains clocked by the PHLX Semiconductor Sector index over the same period. Investors may be wondering if this chipmaker has enough fuel in the tank to sustain its impressive rally for the next three years as well and if it is worth buying Broadcom stock following the solid gains it has already clocked. In this article, we will examine Broadcom's catalysts for the next three years, check to see if this semiconductor stock is capable of delivering more upside, and analyze its valuation to find out if it is still a good bet for investors looking to add a chip stock to their portfolios. Broadcom recently announced its results for the fourth quarter of fiscal 2024 (which ended on Nov. 3). The company's annual revenue grew 44% from the previous year to a record $51.6 billion. Broadcom's organic revenue growth stood at 9% for the year after, excluding the contribution from VMware, which was acquired in November last year. The chipmaker's fiscal 2024 non-GAAP (adjusted) earnings came in at $4.87 per share, an improvement of 15% from the previous year. The good part is that Broadcom's guidance for the first quarter of fiscal 2025 suggests that it is on track to grow at a faster pace this year. The company has guided for $14.6 billion in revenue for the current quarter, which would be a 22% increase over the year-ago period. Though Broadcom hasn't issued full-year guidance, analysts are expecting the company's top line to increase by almost 19% in the current fiscal year to $61.1 billion. Even better, the semiconductor specialist's top line is expected to clock 15% growth over the next couple of fiscal years as well. The important thing to note in the chart above is that Broadcom's revenue estimates have been hiked sizably for all three fiscal years. That can be attributed to the fast-growing demand for Broadcom's artificial intelligence (AI) chips, which are being deployed in data centers for AI model training and inference, as well as to enable faster connectivity between servers for tackling AI workloads. More specifically, Broadcom's AI revenue shot up an incredible 220% in fiscal 2024 to $12.2 billion. The company expects solid growth in the AI business in the current quarter as well, forecasting a 65% year-over-year increase in revenue from sales of AI chips to $3.8 billion. However, don't be surprised to see Broadcom's AI revenue growth getting even better as the year progresses. That's because two additional hyperscale customers have selected Broadcom's custom AI processors for deployment. Its custom chips are already used by major cloud service providers that are looking to reduce their dependence on expensive graphics cards from Nvidia for their AI needs. The expansion of the company's customer base will put it in a stronger position to make the most of a massive growth opportunity. Broadcom management remarked on the latest earnings conference call that the serviceable addressable market for its custom AI accelerators and networking chips could range between $60 billion and $90 billion by fiscal 2027. Assuming the size of the market lands at the midpoint of $75 billion, and Broadcom manages to sustain even a 50% share of the custom chip market at that time as compared to its current market share of 55% to 60%, according to JPMorgan, its AI revenue could hit $37.5 billion in fiscal 2027. That would be nearly triple the AI revenue that Broadcom generated in the previous fiscal year. However, if Broadcom manages to maintain its share of the custom chip market at 60%, and the size of the market indeed hits $90 billion as per the company's estimates, then its revenue from AI-related sales could easily exceed $50 billion. In that case, Broadcom's overall revenue in fiscal 2027 could be well above analysts' expectations that we saw in the chart earlier since its incremental AI revenue could jump by around $40 billion from last year's levels (assuming Broadcom's other business segments don't show any growth). The good part about Broadcom is that it is still trading at an attractive 35 times forward earnings. That isn't very expensive when we consider that the Nasdaq-100 index (using the index as a proxy for tech stocks) has an identical price-to-earnings ratio. What's more, Broadcom's price/earnings-to-growth ratio (PEG ratio) is just 0.63 as per Yahoo! Finance, based on the five-year earnings growth that the company is expected to deliver. A PEG ratio of less than 1 means that a stock is cheap with respect to its estimated earnings growth over the next five years, and Broadcom is quite attractive on this front. So, investors looking to add an AI stock that is attractively valued and capable of delivering strong gains over the next three years to their portfolios can consider buying Broadcom as it seems well placed to sustain its rally.

Why This AI Company Could Be the Best Stock-Split Buy Heading Into 2025 | The Motley Fool

Did you miss Nvidia's remarkable AI-propelled run-up? This company could be next in line. It has been an eventful year for investors in Broadcom (AVGO -2.37%). The stock has more than doubled in value over the past 12 months. The company split its stock over the summer to lower its share price, but enthusiasm over recent earnings results sent it soaring to nearly $250. Stock price movements don't always match what's happening with the underlying company. However, Broadcom's recent business developments point to the possibility that it could be the next big winner in the artificial intelligence (AI) chip space -- and perhaps the best stock-split buy heading into next year. The company has long specialized in semiconductors for networking, switching, and other connectivity applications. That expertise has translated to the artificial intelligence (AI) chip segment, where Broadcom is winning business by developing custom chips called XPUs (extreme processing units) that can work together to perform AI-specific tasks. Thus far, Nvidia has dominated the AI chip market. Its powerful GPUs (graphics processing units) have become the industry standard hardware for providing the specific type of processing power that's best suited for training AI models. Now, as more companies are applying AI to real-world applications, there's an opportunity in AI chips for inference tasks. You could think of AI training as building a car with enough horsepower to go fast, and AI inference as fine-tuning it to drive smoothly along curvy mountain roads. In AI terms, inference is about translating AI's intelligence to new real-world situations and generating the correct results, and doing it efficiently enough that a smartphone or other small computer can do it. It's not that Nvidia doesn't have chips suitable for inference applications, but companies may not want to depend on one supplier for all their chips. The AI boom has already significantly expanded Nvidia's profit margins. It's becoming apparent that Broadcom is stepping into this opportunity, specifically in inference chips. Its fiscal 2024 fourth-quarter report put a spotlight on its strong AI momentum. Total AI revenue for the fiscal year rose 220% to $12.2 billion. Management discussed the outlook for its AI XPUs on the company's earnings call. Though it did not name them specifically, it did acknowledge Broadcom has three high-profile customers with multigeneration product roadmaps and plans to each amass over a million XPU chips on a single cluster by 2027. Two additional large-scale AI customers are also in the earlier stages of developing custom AI XPU chips. In dollar terms, management estimates that Broadcom's AI-related market opportunity could be between $60 billion and $90 billion in 2027, and it expects that the company will take a leading share of that total. Reports have emerged throughout the year that Broadcom is working with ChatGPT developer OpenAI and Apple on inference chips, which would fit the profile management described. If so, it's a legitimate sign that Broadcom could factor even more into the AI chip market than expected, which would be a significant catalyst for the company. Again, Broadcom's AI revenue was only $12.2 billion in its recently ended fiscal 2024. It's not always wise to chase hot stocks, and Broadcom, which has risen 50% over the past month alone, is undoubtedly on a heater. But this isn't hype -- the stock's rise was driven by fundamentals. Analysts are adjusting Broadcom's long-term earnings growth estimates as its AI opportunity comes into focus. Even after the stock's tremendous gains, Broadcom's forward P/E ratio of 40 is a reasonable valuation for a business expected to grow earnings at more than 21% annually over the next three to five years. The stock trades at a PEG ratio of 1.9, which signals Broadcom's expected growth and valuation are beginning to balance out. I'm OK buying high-quality stocks even when their PEG ratios are in the 2.0 to 2.5 range. Still, more could come as the company's two newer AI chip customers move to their production phases. It's also worth remembering that Broadcom's software business has grown due to its blockbuster VMware acquisition last year. Broadcom's valuation is still reasonable, making it a compelling stock to buy heading into 2025 and hold at least through the coming AI ramp-up over the next several years.

History Says the Nasdaq Will Soar in 2025. 1 Stock-Split Stock to Buy Before It Does. | The Motley Fool

This semiconductor and data center player has grown like wildfire over the past couple of years and shows no signs of slowing. The Nasdaq Composite has repeatedly reached new heights in 2024, notching more than 110 new all-time highs. Its record run has been fueled by a string of encouraging developments. The accelerating adoption of artificial intelligence (AI) was the initial catalyst for the rebound, but investor sentiment has been buoyed by waning inflation, recent interest rate cuts, and the U.S. election results. The tech-focused index jumped 43% last year and is up roughly 30% so far in 2024 (as of this writing). Students of history will note that the rally will likely continue well into 2025. Stock charts reveal that the current bull market kicked off in October 2022. While each upswing is different, history can provide context. Bull markets have historically run for more than five years, on average. We're a little over two years into the current run, which suggests it will likely continue next year. Furthermore, in years following gains of 30% or more, the Nasdaq has increased an additional 19%, on average, which suggests the coming year could be a good one for the market. Investors have also embraced the renaissance of stock splits. This has them examining companies that have split their shares, as this is generally the result of a well-run company with strong sales and earnings growth. Such is the case with Broadcom (AVGO 3.15%). The stock has gained 98% so far this year and 2,100% over the past decade (as of this writing). This led to a 10-for-1 stock split, which it completed in mid-July. Yet, despite its recent rally, there's reason to believe that Broadcom's impressive run will continue in 2025 and beyond. Read on to find out why. Broadcom provides a vast array of semiconductor, software, and security products that supply the mobile, broadband, cable, and data center industries, yet many investors continue to underestimate its reach. Management estimates that "99% of all internet traffic crosses through some type of Broadcom technology." That's just the beginning. Broadcom is comprised of "26 category-leading semiconductor and infrastructure software divisions," according to the company. Its semiconductor solutions are crucial components in the networking, server storage, broadband, wireless, and industrial arenas. At the same time, infrastructure software serves the mainframe, distributed, cybersecurity, storage area networking, and cloud infrastructure spaces. Broadcom's massive reach gave the company a strategic advantage when generative AI went viral early last year. Many of its products are essential components in data centers, where most AI processing takes place. One of the consequences of the rapid adoption of AI has been the scramble to upgrade data centers to handle the rigors of AI. Nvidia CEO Jensen Huang suggests that there will be more than $1 trillion in data center upgrades over the coming five years, with another $1 trillion spent to bring new data centers online. That represents a significant opportunity for Broadcom. Earlier this year, recent Broadcom acquisition VMWare was recognized by Gartner's Magic Quadrant as a leader in software-defined wide area network (SD-WAN) for the seventh consecutive year, attesting to its critical place within the industry. The results are compelling. For its fiscal fourth quarter (ended Nov. 3), Broadcom generated revenue of $14 billion, which jumped 51% year over year. Its adjusted earnings per share (EPS) of $1.42 climbed 31%. Management was clear that surging demand for AI was fueling the results. AI networking revenue soared 158% year over year, while sales of custom accelerators (XPUs) doubled, and revenue from connectivity products grew fourfold. For the upcoming first quarter, Broadcom is guiding for $14.6 billion in revenue, ahead of Wall Street's expectations of $14.47 billion. Management is also guiding for continued margin expansion, which would raise adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to 66% of revenue, from 65% in Q4. Looking further ahead suggests that its growth is poised to accelerate. Management is forecasting AI revenue of between $60 billion and $90 billion by fiscal 2027. When compared to the $12.2 billion in AI revenue it generated in fiscal 2024, that suggests growth of between 391% and 638% over the coming three years. The company also announced that it has added two new hyperscale customers -- not included in its projections -- which suggests its growth could be even more robust. Wall Street is equally bullish. Analysts' average price target is roughly $234 (as of this writing), which represents potential upside of 6%. Additionally, of the 43 analysts who offered an opinion in December, 88% rate the stock a buy or strong buy, and none recommend selling. However, Jefferies analyst Blayne Curtis is much more bullish than his Wall Street colleagues. Just this week, he increased his price target to $300, which represents potential upside for investors of 36%. He's particularly excited about the opportunity involving application-specific integrated circuits (ASICs), which he believes will play a growing role in AI. He goes on to note that Broadcom is "uniquely positioned with AI ASICs rapidly growing in complexity and volumes." One consequence of the recent price surge is Broadcom's valuation. The stock currently trades for about 35 times forward earnings, compared to a multiple of 30 for the S&P 500. While that's admittedly a premium valuation, it shouldn't be viewed in a vacuum. Broadcom has outperformed the broader market by a wide margin over the past five years, generating gains of 592%, roughly seven times the return of the broader index. When viewed through that lens, I'd argue Broadcom is a buy.

Could This Artificial Intelligence (AI) Stock Be the Next Nvidia? | The Motley Fool

Broadcom's (AVGO 1.13%) shares surged by nearly 25% after the company posted an impressive financial performance for the fourth quarter of fiscal 2024 (ended Nov. 3). This leading custom chip designer and infrastructure software maker has emerged as a major beneficiary of the ongoing artificial intelligence (AI) trend, especially since hyperscalers seek specialized options to improve productivity and reduce costs. While Nvidia's (NVDA 3.08%) general-purpose Hopper and Blackwell architecture AI chips are highly sought-after in the AI market, Broadcom has successfully created its niche. Broadcom works closely with customers to develop custom AI accelerators (XPUs) and networking infrastructure tailored to their AI needs. Nvidia's AI chip dominance has been pivotal in propelling its stock by nearly 163% in 2024. Broadcom's shares are also up by almost 115% in 2024. Can this AI stock become the next Wall Street favorite and take Nvidia's position? Let's find out. Fiscal 2024 has been quite exceptional for Broadcom. Revenue soared 44% year over year to a record level of $51.6 billion in Q4. AI business, which includes custom AI accelerators and AI-optimized networking solutions, was undoubtedly a major growth catalyst, with revenue rising 220% year over year to $12.2 billion in fiscal 2024. Broadcom has demonstrated impressive technological strength by developing next-generation XPUs using 3-nanometer (nm) process technology. The company is focusing on both computing and networking opportunities. Current AI infrastructure setups with 500,000 XPUs allocate 5% to 10% of the resources to networking content (hardware and software) compared to computation content. However, with the company's three top hyperscale customers planning to deploy nearly 1 million XPUs in 2027, 15% to 20% of resources will be allocated to networking content. Broadcom is well positioned to capitalize on this opportunity, thanks to its expertise in scaling AI infrastructure (connecting XPUs within and across data racks) and deep engagement with customers. Broadcom estimates its AI serviceable addressable market (SAM) for XPUs and networking infrastructure to be worth $60 billion to $90 billion by 2027. Furthermore, Broadcom has been selected by two additional hyperscale customers for their next-generation XPUs. The company expects these customers to start generating revenue before 2027, thereby resulting in further expansion of its AI SAM. Broadcom has successfully improved VMware's operating margin from 30% before acquisition to a staggering 70%, within one year of closing the deal. The company reduced VMware's quarterly expenses from an average of $2.4 billion pre-acquisition to $1.2 billion in the fourth quarter. Subsequently, the company is on track to deliver incremental adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) far more than $8.5 billion and earlier than the initial target of three years post-deal closure. Broadcom has also strengthened VMware's data center virtualization business. Data center virtualization involves creating virtual data centers on a single physical server to optimize resource utilization. Since the acquisition, the company has signed up more than 4,500 of its largest 10,000 customers for VMware Cloud Foundation (VCF), enabling them to deploy private cloud environments on their on-premise IT infrastructures. Subsequently, the annualized booking value (ABV) for VMware is expected to grow from $2.7 billion in the fourth quarter to more than $3 billion in the first quarter of fiscal 2025. All these initiatives helped reduce Broadcom's overreliance on the semiconductor business by strengthening its position in the enterprise software market. Broadcom is trading at about 20.6 times the trailing-12-month sales, significantly higher than its historical five-year average price-to-sales (P/S) multiple of 11.68. The rich valuation, however, is justified considering that the company is benefiting from robust AI-powered tailwinds. Furthermore, Broadcom's valuation is far lower than Nvidia's P/S multiple of 27.75. Despite being a semiconductor player targeting the same AI infrastructure market, Broadcom has much catching up to do before it dethrones Nvidia. Nvidia accounts for 70% to 95% of the AI chips used to train and deploy large language models. Nvidia has been successfully transitioning its large GPU-installed base from training to inferencing (executing models in the production environment) with the help of software frameworks, libraries, and algorithms. With hyperscalers and enterprises keen on optimizing their AI spend, many would choose to stick with Nvidia instead of switching to Broadcom. Additionally, Nvidia has built a broad ecosystem of hardware, software, and support services. Hence, the company is well positioned to capture the incremental share in the AI market. Considering these factors, I believe that it may take a few more years for Broadcom to become the next Nvidia.

Will Broadcom Stock Have Its 'Nvidia Moment' in 2025?

Chipmaker Broadcom's (AVGO) latest earnings-fueled rise has made it the newest member of the $1 trillion dollar club. But what's next for the stock? Some on Wall Street see artificial intelligence-driven demand poised to push sales of its chips to fresh highs, powering its stock higher in 2025. But others are more cautious -- in the near term, at least. Shares of both Nvidia and Broadcom have more than doubled in value in 2024, placing them among the S&P 500's top performers for the year. Analysts, however, are more bullish on the former, with high expectations for Nvidia in early 2025 and the expectation that Broadcom's next big break could come further down the line. Broadcom's "robust AI story is finding its own 'Nvidia moment'" as the AI business picks up steam, Bernstein analysts told clients Monday. But they also warned that Broadcom's "core business remains fairly lousy," with material opportunities potentially years away. Broadcom's recent gains have drawn comparisons to Nvidia's meteoric rise. Demand for its chips that support AI has surged, pushing sales to record levels. Broadcom said its fiscal 2024 revenue from AI more than tripled year-over-year to $12.2 billion, helping boost its total sales for the year above $51 billion. CEO Hock Tan on Broadcom's latest earnings conference call said the company sees its "opportunity over the next three years in AI as massive," according to a transcript provided by AlphaSense, with several of its customers still expanding their AI infrastructure and its own AI business expected to outgrow other segments. Analysts, however, appear less certain about Broadcom stock's room to rise. While all 14 of the analysts covering Broadcom tracked by Visible Alpha hold a "buy" or equivalent rating, their average price target of $238 would represent only a partial recovery from Wednesday's losses and a decline from the stock's all-time closing high, set Monday. Bernstein analysts expect the "material opportunity" for Broadcom could be a few years out. They have an "outperform" rating on the shares, along with a $250 price target that is about 12% above Wednesday's close -- which came after its shares tumbled 7% in a Fed-driven tech selloff. All but one of 20 analysts covering Nvidia tracked by Visible Alpha hold a "buy" or equivalent rating for Nvidia, with their consensus price target of about $177 implying roughly 37% upside from Wednesday's closing price around $129. Still, Broadcom is a popular name on Wall Street. Bank of America listed Broadcom among its top semiconductor industry picks for 2025, identifying it as an "AI leader" alongside Nvidia and Marvell Technology (MRVL). And JPMorgan, which called the stock a "top pick" when it hiked its price target to $250 last week, said it expects Broadcom's AI revenues could jump another 40% in fiscal 2025, with expanding market share in the next few years as it grows its customer base. "The stock has clearly been held back," Morgan Stanley analysts said, telling clients they "expect momentum to build from here." Broadcom, they wrote, could present "one of the most compelling ways to play AI semis over the next 2-3 years" behind Nvidia.

Nvidia Stock Investors Just Got Bad News From AI Semiconductor Rival Broadcom | The Motley Fool

Complex data center workloads like training machine learning models and running artificial intelligence (AI) applications would take a very long time if powered only by central processing units (CPUs). To that end, specialized semiconductors are used to speed up computationally intensive AI tasks. In that semiconductor vertical, Nvidia (NVDA 0.39%) graphics processing units (GPUs) have emerged as the industry standard. In fact, the company has between 80% and 95% market share in AI accelerators, according to analysts. But Nvidia shareholders recently got some worrisome news from rival Broadcom (AVGO 3.15%). Broadcom sells a range of semiconductor products, including combined Wi-Fi and Bluetooth chips in Apple and Samsung smartphones, as well as networking chips in Arista switches. But Wall Street is particularly fascinated by its leadership in application-specific integrated circuits (ASICs.) ASICs are chips purpose-built for specific use cases like accelerating artificial intelligence (AI) workloads. Analysts estimate Broadcom has approximately 60% market share in custom AI chips due to its relationships with three hyperscalers, a term that refers to companies with vast data center footprints. While Broadcom has not identified its hyperscale customers, analysts generally believe they are Google parent Alphabet, Meta Platforms, and TikTok parent ByteDance. Broadcom estimates revenue from its three existing hyperscale customers will range from $60 billion to $90 billion in 2027, up from $12.2 billion in 2024. In other words, the company anticipates that custom AI chip sales will increase at least 70% annually in the next three years, but perhaps as quickly as 95% annually. That is disappointing for Nvidia shareholders because it means Broadcom will likely gain market share in AI accelerators. In fact, analysts at Morgan Stanley estimate that ASICs will account for 13% of AI accelerator sales in 2027, up from 11% in 2024. They also think that figure could hit 15% in 2030. But there is more bad news for Nvidia shareholders. Broadcom CEO Hock Tan told analysts on the fourth-quarter earnings call that Broadcom has selected two new hyperscalers that are likely to be revenue-generating customers by 2027. That means revenue from custom AI chips could actually grow faster than 95% annually in the next few years. Importantly, while Broadcom did not identify the customers, analysts believe they are Apple and ChatGPT creator OpenAI. I mentioned that Broadcom selected two additional hyperscalers as potential customers. CEO Hock Tan himself used that word because Broadcom will not develop ASICs for small companies, nor would small companies have an interest in using custom AI chips. There are two reasons for that. First, designing ASICs is expensive, so the customer must have a data center footprint large enough to warrant the expense. Piper Sandler analyst Harsh Kumar recently told CNBC that each chip costs about $500 million to design, so it would not be financially sensible to work with clients that can only order a few thousand. Instead, orders must be in the range of 250,000 to 500,000 units. Second, custom chips are less flexible because they are designed for specific workloads and lack supporting software development tools. Nvidia offers a robust ecosystem of code libraries and pretrained models that streamline GPU application development. No such tools exist for ASICs. That means deploying custom chips requires a high degree of technical expertise, which means Broadcom's customer base is limited. Additionally, companies that experiment with ASICs may ultimately decide the costs outweigh the benefits. Antoine Chkaiban at New Street Research says only two companies have deployed custom AI silicon at scale: Google and Amazon. So Nvidia is well positioned to maintain its leadership in AI accelerators. Bank of America analysts estimate it will capture 75% market share in 2030, down only slightly from 80% in 2024. Looking ahead, Wall Street thinks Nvidia's adjusted earnings will increase at 34% annually through fiscal 2027, which ends in January 2027. That consensus makes the current valuation of 53 times adjusted earnings look very reasonable. Prospective investors can buy a few shares with confidence, and current shareholders have good reason to optimistic going forward.

Missed Out on Nvidia: 1 No-Brainer Artificial Intelligence (AI) Stock to Buy Before It Crushes the Market in 2025, and Beyond | The Motley Fool

Nvidia (NVDA 3.08%) is the top player in the market for data center graphics processing units (GPUs) that are being deployed in data centers for artificial intelligence (AI) training and inference, with some estimates putting the semiconductor giant's share of this market at 90%. The good part is that Nvidia's dominant position in the AI chip market has allowed it to deliver remarkable growth to investors in the past couple of years, driven by the impressive growth in the company's revenue and earnings. But at the same time, this remarkable rally in Nvidia stock has made it expensive. Nvidia commands a price-to-sales ratio of 29, which is pretty high when we consider that the U.S. technology sector has a sales multiple of 8.2. The earnings multiple of 54 isn't cheap, either. However, the pace at which Nvidia has been growing is the reason why it is deserving of rich valuation multiples. More importantly, the huge addressable opportunity that the company is sitting on indicates why it can keep justifying its valuation and deliver more upside in the future. Nvidia isn't the only leading AI semiconductor stock that investors can buy right now. There is another dominant AI chip stock that's been clocking impressive growth of late and is relatively cheaper than Nvidia. This company recently released its quarterly results, and the stock soared. Let's see why that was the case and check if this AI stock can continue crushing the market in 2025. Broadcom (AVGO 1.13%) released its fiscal 2024 fourth-quarter results (for the quarter ended Nov. 3) on Dec. 12. The company's revenue shot up 51% year over year to $14 billion, while non-GAAP (generally accepted accounting principles) earnings increased by 28% to $1.42 per share. Consensus estimates were projecting Broadcom to deliver $1.39 per share in earnings, and its top line almost matched Wall Street's expectations. Broadcom's organic revenue growth (excluding the revenue from the VMware acquisition completed in November 2023) came in at 9%. The company guided for $14.6 billion in revenue for the first quarter of fiscal 2025, which would be a 22% improvement over the same period last year. Additionally, the chipmaker is expecting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to come in at 66% of revenue, which would be a nice increase over the year-ago period's reading of 60% of revenue. AI is playing a key role in driving the solid acceleration in Broadcom's top- and bottom-line growth. The company finished fiscal 2024 with AI-related revenue of $12.2 billion, a huge improvement over the $3.8 billion generated from this segment in the previous fiscal year. The good part is that Broadcom is expecting its AI revenue to keep growing at a healthy rate in the current fiscal year as well. The company forecasts a 65% year-over-year jump in AI-related revenue in the current quarter to $3.8 billion, accounting for 26% of its overall revenue. So, AI is now moving the needle significantly for Broadcom, and that trend is likely to continue thanks to the massive market that Broadcom sees for custom AI processors and networking chips. Broadcom management said on the company's latest earnings conference call that it sees the serviceable addressable market for custom AI and networking chips to range of $60 billion to $90 billion by fiscal 2027. Even at the lower end, the addressable opportunity is five times the AI revenue that Broadcom generated last quarter. The good part is that Broadcom is in a solid position to corner the lion's share of this addressable market, since it is the dominant player in the market for custom chips, formally known as application-specific integrated circuits (ASICs). The company reportedly controls between 55% and 60% of this space, according to JPMorgan. So, there is a solid chance that Broadcom's AI-specific revenue could increase at an incredible pace over the next three years. Analysts have rushed to increase their growth expectations from Broadcom following its latest report. This is evident from the chart. The company's revenue in the current fiscal year, which began last month, is expected to jump 19% from the previous year's reading of $51.5 billion. Additionally, its bottom line is expected to jump by 28% to $6.25 per share, which would be a big increase over the previous fiscal year's earnings growth of 15%. However, there is a good chance that Broadcom may be able to clock faster growth than what analysts are expecting, considering the huge addressable opportunity, as well as its solid share of this market. That's why it won't be surprising to see Broadcom stock maintaining its red-hot rally in 2025 and beyond, as it is expected to maintain healthy double-digit growth rates over the next couple of fiscal years as well. All this makes Broadcom a top AI stock to buy right now, especially considering that it has a price/earnings-to-growth ratio (PEG ratio) of just 0.72, per Yahoo Finance (based on the expected earnings growth it is forecast to deliver over the next five years). That's slightly lower than Nvidia's PEG ratio of 0.82. So, investors looking for an alternative to Nvidia should consider taking a closer look at Broadcom, as it has the potential to deliver more gains and is slightly cheaper when compared to the expected growth that it is expected to clock over the next five years.

Broadcom stock positioned to eclipse Nvidia's gains in 2025

Broadcom is poised for significant growth in 2025, with expectations of outperforming Nvidia as major tech companies diversify suppliers and reduce reliance on singular sources. According to Stephen Yiu, fund manager of the Blue Whale Growth Fund, who told CNBC, companies like Microsoft, Amazon, Google, and Meta Platforms are not only purchasing Nvidia's GPUs but are also developing custom chips Broadcom's stock surged over 126 percent in 2024, driven by the company's reported AI revenue, which more than tripled to $12.2 billion. Its market capitalization recently crossed $1 trillion, making it one of Blue Whale's top ten positions. Chief Executive Hock Tan emphasized that Broadcom is collaborating with major cloud customers, identified as Meta, Alphabet, and ByteDance, to develop custom AI chips. Each of these customers plans to deploy 1 million AI chips by 2027, further reflecting the shift in AI chip spending toward tailored solutions. Yiu maintains that while Nvidia remains the market leader with a value of $3.2 trillion, the considerable growth potential for Broadcom should not be overlooked. "For a $1 trillion company to grow 50% to become $1.5 trillion is reasonable," he explained. This contrasts with Nvidia, which would need to add another $1.5 trillion to match that growth, a much more daunting prospect given its size. Broadcom's prospects have garnered favorable reviews from Wall Street analysts. Goldman Sachs raised its target price for the stock from $190 to $240, citing increased confidence in the company's revenue and earnings growth outlook. Morgan Stanley characterized Broadcom as "one of the most compelling ways to play AI semis" over the coming years, while Bernstein analysts also raised their target price to $250, noting that the AI narrative is gaining traction. Despite this enthusiasm, Bank of America has issued a cautionary note regarding competition from Nvidia, specifically its stronghold in enterprise customers and merchant silicon. As the AI semiconductor market evolves, investors are closely monitoring these developments. While Yiu has cut his fund's position in Nvidia to below 10 percent, he continues to see value in Broadcom, emphasizing the potential for outperformance in the shorter term. AI boom sends Broadcom soaring to $1 trillion market cap Jefferies analyst Blayne Curtis highlighted Broadcom's unique position within the chip sector as the demand for application-specific integrated circuits (ASICs) grows according to a Morningstar report. These ASICs, which facilitate AI applications, are increasingly becoming essential for both training and inference processes. Curtis assures that as complexities and volumes of these chips rise, Broadcom stands to benefit significantly. Average selling prices are expected to rise from less than $5,000 to potentially "tens of thousands of dollars per unit" as the technology evolves. Broadcom outlined a serviceable addressable market ranging from $60 billion to $90 billion in AI by 2027, contingent on three current customers. This market might expand based on two other pre-production customers' actions, indicating ample growth opportunities. Curtis has adjusted Broadcom's price target to $300, reflecting a 37% increase above the stock's recent close of $218.32. His bullish outlook continues despite fluctuations within the broader tech sector. Investors remain cautious, noting Broadcom's recent rally of over 30% this month alone. With such rapid growth, the CNBC Investing Club indicated it would have reconsidered its position if not restricted. Current market conditions suggest a wait-and-see approach, as developments unfold in both companies' strategies and market positioning.

Why Investors Were Sweet on Stock-Split Stock Broadcom Today | The Motley Fool

Broadcom (AVGO 1.13%) is not only the best play on the artificial intelligence (AI) revolution, it's the best stock investment of all for 2025. That, at least, is the view of one enthusiastic researcher tracking the chipmaker's shares. On news of it granting Broadcom its top pick for 2025 status, investors pushed the stock's value up by more than 1% on Friday. Jefferies is the company behind the recommendation; Friday morning, it tapped Broadcom as its No. 1 stock for the coming year. In doing so, it enacted a significant price target raise, to $300 per share from the preceding $225. According to reports, Jefferies believes that Broadcom is beautifully placed for a pop, as it is a key developer and manufacturer of advanced, custom-designed chips (known as ASICs). Such products are ideal for the heavy processing demands of AI. Ultimately, by 2027 the company could reap over $60 billion in annual sales of chips that power AI functionalities. Jefferies wasn't the only Broadcom-tracker upping its price target that day. Morgan Stanley analyst Joseph Moore also made a change, lifting his price target to $265 per share from $233. Moore reiterated his overweight (buy, in other words) recommendation on the stock. The AI market is, almost indisputably, Broadcom's oyster. There's little doubt that the already-hot demand for the crucial hardware to power the technology will continue to rise, most likely powerfully and sustainably. Broadcom seems like an obvious, and very good, bet on the world's AI-driven future.

What Could Broadcom's Latest Earnings Report Mean for Nvidia Investors? | The Motley Fool

The demand for the chips required for training and deploying artificial intelligence (AI) models and applications in data centers increased at a remarkable pace in the past couple of years. Nvidia (NVDA 0.39%) has been the biggest beneficiary of this fast-growing market as it left its fellow chipmakers in the dust by capturing the lion's share of the AI semiconductor space. No other chipmaker comes close to Nvidia in terms of revenue generated from selling AI chips. For instance, in the third quarter of fiscal 2025 alone (which ended on Oct. 27), Nvidia sold $30.8 billion worth of data center chips, a remarkable increase of 112% from the same period last year. Its nearest rival in data center graphics processing units (GPUs) -- Advanced Micro Devices -- is forecasting $5 billion in data center GPU revenue this year. However, GPUs aren't the only type of chip that cloud service providers are using for AI model training and inferencing. This is evident from the rapid growth that Broadcom (AVGO 3.15%) reported in the demand for its application-specific integrated circuits (ASICs) in the latest fiscal year, thanks to AI-related demand. Let's take a closer look at the growth of Broadcom's AI chip business and see if this could be a reason for Nvidia investors to worry. Broadcom finished fiscal 2024 (which ended on Nov. 3) with $12.2 billion in revenue from sales of its custom AI accelerators -- which it brands as XPUs -- and networking chips needed in AI data centers. Of course, that's nowhere near the annual revenue that Nvidia is on track to generate from its data center business this year. After all, Nvidia's data center revenue in the first nine months of the current fiscal year stands at a massive $79.6 billion. However, investors should note that the terrific pace of growth in this segment has been decelerating of late. That's not surprising, considering that Nvidia already attained a massive revenue base. It is currently in the middle of a transition to a new generation of AI data center chips based on its Blackwell architecture. At the same time, the big jump in Broadcom's AI revenue shows that the demand for alternative chips to tackle AI workloads is on the rise. Again, that's not surprising. Major cloud companies have been working on in-house chips to cut costs and speed up AI development, given how expensive Nvidia's AI chips are and the long wait times they require during production. This trend is playing in Broadcom's favor as its ASICs -- chips designed for performing specific tasks, which offer improved performance and efficiency over GPUs -- are reportedly being used by big names such as Alphabet's Google, Meta Platforms, ByteDance, and even OpenAI. This trend is likely to continue in the future as well. According to McKinsey, ASICs are expected to "serve the majority of workloads" in AI accelerators. Not surprisingly, the market for AI-specific ASICs is expected to show an annual growth of 32% through 2030, according to Lucintel. Broadcom management struck a confident note on the latest earnings conference call, with CEO Hock Tan stating: As you know, we currently have three hyper-scale customers who have developed their own multi-generational AI XPU road map to be deployed at varying rates over the next three years. In 2027, we believe each of them plans to deploy 1 million XPU clusters across a single fabric. We expect this to represent an AI revenue serviceable addressable market, or SAM, for XPUs and network in the range of $60 billion to $90 billion in fiscal 2027 alone. Broadcom, therefore, believes that the market for custom AI chips is set to grow exponentially over the next three years. Concerns about a gradual slowdown in Nvidia's AI-fueled growth and the rising competition in the AI chip space are probably why shares of the company headed lower in the past month, despite posting better-than-expected results on November 20. However, investors shouldn't be worrying just yet. That's because the demand for AI-focused GPUs is expected to be way higher than that of custom chips in the future. We saw that Broadcom is forecasting the custom AI processor market to hit $60 billion to $90 billion in annual revenue in the next three years. However, the overall size of the AI accelerator market -- including central procesing units (CPUs), GPUs, and ASICs -- is expected to hit $500 billion in 2028, according to AMD. Other reports also suggest something similar, with one estimate putting the size of the AI chip market at $621 billion in 2032, of which 34% are expected to be GPUs. So, the size of the AI GPU market is expected to exceed $200 billion in the long run, suggesting that Nvidia still has more room for growth. Moreover, Nvidia's data center opportunity isn't just limited to AI. The transition to accelerated computing means that the company is sitting on a huge addressable opportunity that could drive impressive growth for years to come. So, even though Broadcom's AI business has gained impressive momentum, Nvidia investors shouldn't be worried. The latter company can still deliver healthy gains in the long run.

1 Wall Street Analyst Thinks Broadcom Is Going to $260. Is It a Buy Now? | The Motley Fool

Shares of Broadcom (AVGO -6.91%) are suddenly soaring. The diversified semiconductor company impressed the market with its fiscal 2024 fourth-quarter earnings report last week, in particular its artificial intelligence (AI) growth. Broadcom, which may be best known for networking chips, has become the No. 2 chip stock behind Nvidia in the AI race, and the company now seems to be fulfilling that promise. The company said AI revenue jumped 220% to $12.2 billion in the fiscal year due to the growth of its AI XPUs and "Ethernet networking portfolio." That made up nearly half of its $30.1 billion semiconductor revenue in the year. Now, Wall Street is taking notice with a number of analysts upgrading the stock and raising price targets in the aftermath of the report. Among the analysts reaffirming their bullishness on Broadcom was Truist, which raised its price target from $245 to $260 per share and reaffirmed its buy rating, according to media reports. The price target hike was the bank's second since Broadcom reported last week, reflecting the stock's post-earnings surge as it is now up 33% as of Dec. 17. Based on the $260 price target, Truist believes Broadcom has near-term upside of 8%. Truist was particularly impressed by management's forecast that demand from three of its ASIC (custom chip) customers will reach $60 billion to $90 billion by fiscal 2027, implying a compound annual growth rate of 20% to 30% over the next three years. Broadcom has been a longtime winner on the stock market, and today, the company is one of the most valuable companies in the world with a valuation topping $1 trillion. Thanks to strategic acquisitions and organic growth, Broacom is well positioned to capitalize on AI demand. The stock still looks like a strong buy.

Nvidia vs. Broadcom: Which Is the Better AI Chip Stock to Own in 2025? | The Motley Fool

Both stocks have had strong runs in 2024, with Nvidia's stock up over 170% year to date as of this writing and Broadcom up around 107%. Let's consider which semiconductor stock looks like the better buy heading into 2025. Since the start of the AI boom, Nvidia has been the biggest winner. As the maker of graphics processing units (GPUs) the company's chips became the backbone of AI infrastructure. Training large language models (LLMs) and running AI inference take a lot of computing power, and GPUs have proven to be the best chips for these tasks as they are able to perform many calculations at the same time in what is called parallel processing. Nvidia, meanwhile, became the market leader in GPUs due to its CUDA software platform. The company originally developed the free software to allow developers to program its chips for tasks beyond speeding up the graphics rendering in things like video games, the job for which they were initially created, in order to sell more chips. As a result, CUDA became the program on which developers learned to train GPUs, which is what has helped create the large moat the company sees today. It currently has about a 90% market share in GPUs as a result. The combination of its powerful GPUs and wide moat due to CUDA led the company to see astronomical growth as large tech companies race to develop more powerful AI models. Through the first nine months of its fiscal 2025 ending in January 2025, Nvidia's revenue surged 135% to $91.2 billion, while last quarter its revenue soared 94% to $35.1 billion. With AI models needing exponentially more computing power as they become more advanced, Nvidia's future growth prospects also look promising. In fact, recent iterations of Alphabet's Llama AI model and xAI's Grok model are being trained using up to 10 times as many GPUs as their predecessors. At the same time, Nvidia's hyperscale customers (those that own huge data centers) have indicated they plan to increase their spending on AI infrastructure next year as they see AI as a generational opportunity. For their part, analysts are projecting the company will grow its revenue by just over 50% next year. While Nvidia is dominating the AI chip space, Broadcom is making inroads by helping customers develop custom AI chips. Its application-specific integrated circuits, or ASICs, are designed specifically for a customer's precise needs and can help with improved performance and more efficient power consumption. Alphabet was the first company to use Broadcom's technology and expertise to develop its own custom AI chip. The result is a tensor-processing unit (TPU) called Trillium designed specifically to work within Google's TensorFlow (a software library for AI and machine learning). Alphabet said these TPUs have several features, such as a matrix multiply unit (MXU) and proprietary interconnect topology, that differentiate them from mass-merchant GPUs and make them ideal for accelerating AI training and inference. While there were some reports that Alphabet was looking to just go on its own without Broadcom's help, Broadcom won the design contract for the next generation of Alphabet's TPUs. Meanwhile, the company gained four more custom AI chip customers. Meta Platforms and TikTok owner ByteDance are widely believed to be the company's established customers, while OpenAI and more recently Apple are thought to be recent customer wins. On its latest earnings call, Broadcom said its three largest custom AI chip customers had an addressable market of between $60 billion to $90 billion in fiscal 2027 alone and that they were planning on deploying 1 million of its custom AI chips by 2027. Meanwhile, it said its two newer AI chip customers could add to that total. As a reference, it took Alphabet 15 months to have its custom TPUs designed and deployed within its data centers. While the AI opportunity for Broadcom is large, there is a big difference between an addressable market and expected revenue. The company is also involved in a lot of semiconductor and software businesses outside of AI, which aren't growing as quickly. The company grew organic revenue just 11% last quarter when excluding its acquisition of VMware, and analysts are currently looking for the company to increase its revenue by 18% this fiscal year, ending Oct. 31, 2025, and 14% the year after. Nvidia currently trades at a cheaper valuation than Broadcom with a forward price-to-earnings (P/E) ratio of about 30 compared to over 33 for Broadcom. Meanwhile, Nvidia is currently growing its revenue much faster, which is expected to continue in 2025. In addition, Nvidia holds about $30 billion in net cash, while Broadcom has $48.3 billion in net debt. Broadcom created a lot of hype with its comments on its AI addressable market, which have powered its stock price in December. Meanwhile, Nvidia's stock struggled to close out the year. But while Broadcom grabbed the momentum, Nvidia is now the cheaper stock and it's still expected to grow its revenue much more quickly in the near term. Broadcom management has certainly put some doubt in investors' minds when it comes to who will be the big AI chip winner in the coming years. But Broadcom's gains won't necessarily come at Nvidia's expense. GPUs still have more versatility than custom chips and are still considered the standard. However, companies also want an option other than Nvidia to make sure it doesn't become too powerful. I think both stocks have the potential to be winners in 2025, but I prefer Nvidia at this point given its current superior growth and cheaper valuation.

'The next Nvidia': Broadcom is the AI chip stock to own in 2025, investor says

Broadcom is more likely to deliver big gains for investors in 2025 than AI chip leader Nvidia , as major technology companies seek to reduce their dependence on a single supplier, according to fund manager Stephen Yiu. Yiu, portfolio manager of the Blue Whale Growth Fund, said that while Big Tech giants, such as Microsoft , Amazon , Google and Meta Platforms , had bought up Nvidia's graphics processing units (GPUs) in vast quantities, they were now also developing their own custom chips for artificial intelligence applications in an effort to diversify. "Broadcom is not Nvidia, but we would expect Broadcom to be the next Nvidia in terms of outperformance potential, just because they are working very closely with the big tech companies," Yiu told CNBC's Pro Talks on Wednesday . "Nvidia's GPUs are very powerful, but at the same time also very expensive," Yiu added. "From Microsoft's perspective, you don't want to become overly dependent on one single supplier." AVGO YTD mountain Broadcom's stock has surged more than 126 percent this year, reaching a market value of more than $1 trillion after reporting that its artificial intelligence revenue more than tripled to $12.2 billion in 2024 . The stock is one of Blue Whale's top 10 positions. Broadcom's Chief Executive Hock Tan revealed the company is developing custom artificial intelligence chips with three major cloud computing customers, which analysts have identified as Meta, Alphabet, and ByteDance. Tan projected these customers will each deploy 1 million artificial intelligence chips in networked clusters by 2027. While Yiu maintains an investment position in Nvidia, he has significantly reduced it from nearly 10 percent of his fund's portfolio. "It's a matter of the potential outperformance from here," Yiu explained. "We're not expecting Nvidia to double from here in the next two years. It's very difficult from a law-of-large-numbers perspective." Wall Street's view Wall Street analysts have also grown increasingly bullish on Broadcom's prospects. Goldman Sachs raised its price target for the shares to $240 from $190, citing " even higher conviction on the company's forward revenue and earnings growth outlook" in a report dated Dec. 15. Morgan Stanley analysts described Broadcom as "one of the most compelling ways to play AI semis " over the next two to three years, while Bernstein analysts noted that the " AI story seems to really be coming into its own " as they raised their price target to $250. However, Bank of America cautioned about potential risks from "stiff competition against NVDA's stronghold in merchant silicon and enterprise customers." Nvidia remains the dominant force in artificial intelligence chips with a market value of $3.2 trillion and stock gains exceeding 165 percent this year. Yiu believes Broadcom offers a better investment opportunity precisely because of its smaller size. "For a $1 trillion company to grow 50% to become $1.5 trillion is reasonable. But for Nvidia to do that, they would need to add another $1.5 trillion, which is a very big number," he said. The shift in artificial intelligence chip spending comes as major technology companies seek to optimize their massive investments in artificial intelligence infrastructure. Broadcom's custom chips, known as XPUs, differ from Nvidia's graphics processing units and are designed specifically for each customer's needs. The company's growing artificial intelligence business is part of a diverse portfolio, which includes networking components used to connect thousands of artificial intelligence chips and a substantial software division following its recent $69-billion acquisition of VMware. Taking profits Broadcom's more than 30% rally this month alone has meant that CNBC's Investing Club is now more cautious on the stock. Jeff Marks, director of portfolio analysis, said the Club would have trimmed its position if permitted. "Even though the market is technically oversold -- meaning we are more of a buyer than a seller -- we would be selling 100 shares of Broadcom on Monday if we were not restricted." "Although we remain bullish on the long-term AI outlook CEO Hock Tan outlined last week on his earnings call , our discipline dictates it is time to ring the register and lock in gains on the stock's terrific 115% move this year. We are downgrading our rating to a 2 ," Marks said. -- CNBC's Ari Levy, Ashley Capoot and Michael Bloom contributed reporting.

Better Artificial Intelligence (AI) Stock: Broadcom vs. Marvell Technology | The Motley Fool

Semiconductor stocks Broadcom (AVGO 1.13%) and Marvell Technology (MRVL 2.56%) have delivered outstanding gains in 2024, with shares of both companies more than doubling as of this writing thanks to the rapidly growing demand for their application-specific integrated circuits (ASICs) and networking chips that are being deployed in data centers for tackling artificial intelligence (AI) workloads. Broadcom stock is up 124% this year, and Marvell stock has logged gains of 93% as of this writing. But if you had to choose one of these two AI stocks for your portfolio right now following the gains that they have delivered in 2024, which one should you buy? Let's find out. The demand for AI-specific ASICs is growing as cloud service providers are looking to develop chips in-house to reduce their reliance on expensive semiconductors from the likes of Nvidia. This is where Broadcom steps in; it is reportedly manufacturing custom chips for major names such as Alphabet's Google, TikTok parent ByteDance, and Meta Platforms. This strong customer base has allowed Broadcom to make the most of the fast-growing custom AI processor market. The chipmaker generated $12.2 billion in revenue from sales of its custom AI chips and networking processors in fiscal 2024 (which ended on Nov. 3). That was a remarkable surge of 220% from the $3.8 billion in revenue that the company generated from AI chips in fiscal 2023. The good part is that Broadcom is forecasting its AI-related addressable market to increase to a range of $60 billion to $90 billion by fiscal 2027. Management pointed out on the latest earnings conference call that the company is "very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion." A key factor that will work in Broadcom's favor is its strong share of the ASIC market. J.P. Morgan estimates that it commands between 55% and 60% of the custom chip market. If that's indeed the case after the next three years and the company manages to corner even half of this space, its annual AI revenue could range from $30 billion to $45 billion (based on the company's estimated size of the custom AI chip market). So, Broadcom's AI revenue has the potential to increase by a multiple of 2.5 to 4 in the next three years. This explains why analysts have bumped up their expectations for the current and the next two fiscal years. The above chart points toward a nice acceleration in Broadcom's top line considering that it ended fiscal 2024 with organic revenue growth of 9% (excluding the acquisition of VMware, which was completed in November 2023). The company finished fiscal 2024 with consolidated revenue of $51.6 billion. The chart above tells us that its revenue is expected to grow at healthy double-digit rates over the next three years. As such, there is a strong chance that it could continue to remain a top AI stock as well, considering its share of the lucrative custom AI chip market. Marvell is considered to be the second-largest player in the market for ASICs, with an estimated share of 13% to 15%. However, the chipmaker has been gaining ground and is reportedly manufacturing custom AI chips for the likes of Alphabet, Microsoft, and Amazon. The demand for Marvell's custom AI processors seems robust as the company's data center revenue in the third quarter of fiscal 2025 (which ended on Nov. 2) increased by 98% from the same period last year to $1.1 billion. This outstanding growth offset the weak performance in the company's other business segments, which explains why overall revenue increased only 7% year over year to $1.52 billion. However, the outlook for the current quarter indicates that things are improving rapidly. The company's revenue guidance of $1.8 billion for the current quarter points toward a year-over-year increase of 26%. That would be a big improvement over the previous quarter. It is expecting a similar jump in its earnings to $0.59 per share. For comparison, Marvell's bottom line increased by just 5% last quarter from the year-ago period. This rapid improvement in financial performance can be attributed to the faster-than-expected growth in its AI business. The company was originally anticipating $1.5 billion in AI revenue in the current fiscal year, but it now believes that it will significantly exceed the full-year target. That's because of a faster-than-expected jump in the demand for its custom AI chips. More importantly, Marvell is expecting its AI revenue to hit $2.5 billion in the next fiscal year, but the possibility that it exceeds that mark cannot be ruled out since Amazon and others have been expanding their relationship with the chipmaker. Management says that it has "secured supply chain capacity to support our customers' growth forecast," suggesting that it may be able to clock faster growth by fulfilling more demand. In the end, the growth of the company's AI business is so strong that the top line is expected to jump by 41% in the next fiscal year to $8.11 billion following an improvement of just 4% in the current year to $5.75 billion. Consensus estimates are projecting Marvell's impressive growth to last beyond the next fiscal year as well. The solid top-line increase explains why Marvell's bottom line is expected to grow at a terrific pace over the next couple of fiscal years following a jump of just 3% in the current one to $1.56 per share. So, even Marvell has the potential to remain a top AI stock, but is it a better buy than Broadcom? We have seen that both Marvell and Broadcom are set to deliver impressive growth. However, the former is expected to do it faster, as we saw in the charts earlier. That can be attributed to the company's smaller size and potential market share gains in custom AI chips. This is also probably the reason Marvell is carrying a richer valuation than Broadcom. So, investors who are looking for an AI stock that can deliver faster growth can consider Marvell even though it is a tad expensive when compared to Broadcom. But at the same time, Broadcom's dominant position and big addressable market in AI chips means that investors probably won't go wrong with this name, either, if they are looking for a slightly cheaper stock.

Will Broadcom's stock to overtake Nvidia? Here's what experts about the 2025 AI race

The competition for leadership in the AI chip market is intensifying, with Broadcom Inc. positioning itself as a formidable challenger to Nvidia Corporation in the years ahead.The race for dominance in the AI chip sector is heating up, with Broadcom Inc. emerging as a strong contender to rival Nvidia Corporation in the coming years. According to expert forecasts, tech giants like Microsoft, Meta, and Amazon are diversifying their AI chip supply chains, which could shift the power dynamics in this lucrative market. A prediction made by fund manager Stephen Yiu, head of Blue Whale Growth Fund, suggests that by 2025, Broadcom could surpass Nvidia, the current leader in AI chips, in terms of growth potential. As the demand for artificial intelligence (AI) capabilities skyrockets, Nvidia has long been the go-to supplier of graphics processing units (GPUs) for AI applications. However, Yiu suggests that this could change as companies like Microsoft, Meta, and Google look beyond Nvidia's dominance. These companies, which have been significant purchasers of Nvidia's powerful GPUs, are now shifting towards developing their own custom AI chips to reduce their dependency on a single supplier. Broadcom, with its strategic partnerships and innovative chip solutions, is emerging as a potential challenger to Nvidia's reign. Yiu, who has decreased his fund's investment in Nvidia while increasing his stake in Broadcom, believes that the latter's strong collaborations with major tech firms position it for superior growth in the AI chip market. According to him, Broadcom's lower price point and strong customer base provide it with a competitive edge. Broadcom's performance has been nothing short of impressive in 2024, with the company's stock up by over 103% year-to-date as of December 2024. The company's market capitalization recently surpassed $1 trillion, driven in part by its AI revenue, which tripled to $12.2 billion. Broadcom's AI chips are being developed in collaboration with key players such as Meta, Alphabet, and ByteDance, signaling the company's rising influence in the AI chip space. Yiu's prediction stems from Broadcom's ability to scale rapidly despite its current market size. While Nvidia's growth potential remains significant, Yiu notes that it would need to add another $1.5 trillion to its market value to achieve the same percentage growth that Broadcom could see by growing from $1 trillion to $1.5 trillion. This makes Broadcom a more attractive option for investors seeking substantial returns in the AI sector. Nvidia Corporation is a technology firm renowned for designing and producing graphics processing units (GPUs). Nvidia surpassed Apple to become the world's highest-valued company, reaching a market value of $3.53 trillion, fueled by a surge in demand for AI chips.

Stock-Split Watch: Is Broadcom Next?

Broadcom split its stock during this summer. Is another one coming? Does it feel like you've been here before? Semiconductor and software giant Broadcom (AVGO 3.15%) executed a 10-for-1 stock split during the summer. Yet, here I am waving the flag for another potential stock split. Maybe that's a good thing. Broadcom stock has soared nearly 30% since its last split, though most of that has come in just the past few weeks. Does it make sense to split again? After all, stock splits don't make a stock fundamentally cheaper; they lower the share price by proportionately increasing the total share count. So, should investors expect Broadcom to announce another stock split soon? Another stock split so soon? It could happen Most companies split their stock to make trading easier for smaller investors and employees. Investors can accumulate shares in the company without needing deep pockets. Meanwhile, employees sitting on significant gains on shares they've been given as compensation appreciate having more control over how much they cash in at a time. There aren't any rules about why or how often a company can split its stock. Broadcom wouldn't even be the first company to split its stock multiple times in a short period. Tesla executed two stock splits in the two years between August 2020 and 2022. Each share investors owned before those splits would equate to 15 shares today. Admittedly, Tesla's splits were about two years apart, and Broadcom's recent split was only five months ago. I wouldn't say the odds are super high that Broadcom will split its stock in the next month or two. However, I think there's a strong chance of another split in the next few years. AI is sending Broadcom's stock soaring Broadcom recently announced exciting developments regarding its artificial intelligence (AI) opportunities when it reported Q4 earnings for its fiscal year 2024 (ended Nov. 3). Broadcom is developing XPU (extreme processing unit) AI chips for three large customers, with another two in the works. Management wouldn't drop names, but OpenAI and Apple are reportedly among them. These XPU chips are reportedly being used for AI inference, helping AI models effectively apply their trained intelligence to new data it hasn't seen before. You could think of AI training as achieving intelligence and AI inference as using it. It's a different application than training the AI models, which Nvidia has dominated with its accelerator chips. According to the company's most recent conference call, Broadcom's management believes its AI-related revenue opportunity will hit $60 billion to $90 billion by 2027 and the company is poised to capture much of it. That's a big deal because Broadcom's AI revenue for the full fiscal year 2024 was $12.2 billion, a fraction of that. Company-wide revenue was $51.5 billion, so AI is a growth catalyst that could lead to Broadcom doubling its revenue during the next five to 10 years. The stock could eventually warrant another split Nobody can know at what price Broadcom would consider splitting again, but logically, the higher the stock goes, the higher the odds. Broadcom traded at more than $1,000 per share when it split in July. The stock isn't close to that today, but it crept up to more than $250 at one point. The stock trades at a price-to-earnings-growth (PEG) ratio of about 2, which is reasonable for a high-quality company like Broadcom. In other words, Broadcom's price-to-earnings ratio is appropriate for its expected earnings growth, which analysts estimate will average almost 18% during the next three to five years. Given the recent AI updates, growth estimates may increase in the coming months. Higher growth expectations and a reasonable valuation could mean higher share prices. If Broadcom gets to $350 to $400 per share, it might put a stock split on the table. The next split might be less dramatic than the last one, such as 4-for-1 or 2-for-1. Remember, stock splits shouldn't be the reason you buy a stock because they don't affect the per-share financials or increase a company's market value. Broadcom's long-term AI upside makes it a compelling investment, so consider a potential stock split a bonus.

2 Artificial Intelligence (AI) Stocks That Have Roughly Doubled or More in 2024 and Could Soar Even Higher in 2025, According to Wall Street | The Motley Fool

It's been another magnificent year for artificial intelligence (AI) stocks. You could throw a dart at a list of AI stocks taped to a wall and be more likely than not to hit one that has delivered tremendous gains in 2024. However, many analysts think that quite a few of this year's high-flying AI stocks could run out of steam in the next one. But the good times could keep rolling for some. These two AI stocks have roughly doubled or more in 2024, and could head even higher in 2025, according to Wall Street. Broadcom's (AVGO 1.13%) share price has nearly doubled year to date. Actually, the stock had more than doubled for the year until a few days ago, when the Fed's hesitancy to forecast as many rate cuts for 2025 as investors are hoping for led to a stock market sell-off. The interesting thing about Broadcom's impressive performance is that its recent quarterly results haven't been spectacular if we exclude the impact of its acquisition of VMware. However, investors continue to be excited about its AI opportunities. Management is excited, too. "[W]e see our opportunity over the next three years in AI as massive," said CEO Hock Tan on the company's fiscal Q4 earnings call this month. In particular, Broadcom should benefit as some large organizations develop their own custom AI accelerators. These efforts will involve millions of AI accelerator clusters, which will require networking. Management thinks this will represent a market of $60 billion to $90 billion in its fiscal 2027, and it believes the company will be the top player in it. Even after Broadcom's huge share price gains this year, Wall Street remains overwhelmingly bullish about the stock. Of the 43 analysts surveyed by LSEG in December, 38 rated Broadcom as a buy or a strong buy. The other five analysts gave it a hold rating. However, most analysts don't expect the stock's sizzling momentum to continue. The average 12-month price target for the stock is only 4% above its current level, although the most optimistic analyst surveyed by LSEG thinks Broadcom's shares can jump another 35%. Nvidia (NVDA 3.08%) is poised to chalk up back-to-back years of spectacular gains. The stock skyrocketed nearly 239% higher in 2023. In 2024, it's still up more than 160% year to date, despite falling into correction territory in recent weeks. Unlike Broadcom, Nvidia doesn't need to put any asterisks next to its impressive financial results from recent quarters. The GPU maker's revenue soared by 94% year over year in Q3 to $35.1 billion -- a record level. Most of that success has been due to the explosive growth in demand for its data center GPUs. And most of that explosive growth has been due to AI. Management doesn't expect that growth to taper off anytime soon. The demand for the new GPUs based on its Blackwell architecture is greater than supply. CEO Jensen Huang described the Blackwell demand as "staggering" in his comments in the Q3 earnings call. Wall Street remains enamored with Nvidia. A whopping 62 of the 64 analysts surveyed by LSEG in December who cover the stock rated it as a buy or a strong buy. The two outliers recommended holding. The average 12-month price target for Nvidia is nearly 32% above its current share price. I don't always agree with Wall Street analysts (sometimes wisely, sometimes not). However, in this case, I think they're correct in viewing Nvidia as the better AI stock for 2025 than Broadcom. Nvidia's launch of its Blackwell chips should drive sustained revenue and earnings growth for the company throughout the next year. It will almost certainly unveil an even more powerful AI chip in the second half of 2025. I'll be surprised if Nvidia's shares don't jump by another 30% or more over the next 12 months, although I don't expect the same levels of gains we've seen in 2023 and 2024.

Better Semiconductor Stock: AMD vs. Broadcom | The Motley Fool

Semiconductor stocks are a great area to invest in. The industry had a strong 2024 with global sales up 19% year over year and more growth expected in 2025. The World Semiconductor Trade Statistics forecasts the industry to reach nearly $700 billion in 2025, up from $627 billion in 2024. Thanks to factors such as the expanding artificial intelligence market, the industry could enjoy years of additional growth. To capitalize on this, two prominent semiconductor stocks to consider investing in are Advanced Micro Devices (AMD -2.08%) and Broadcom (AVGO -2.37%). Both are seeing strong sales thanks to customer demand for their AI-related products. But if you had to choose only one to invest in, which would it be? Here's a look at AMD and Broadcom to help you arrive at an answer. AMD specializes in semiconductor products for accelerated computing. Accelerated computing uses dedicated components to speed up the processing of data-intensive tasks, such as those performed by AI. AMD sees a growing demand for accelerated computing in the years ahead to support not only AI but also an expanding number of data-intensive applications, including 5G wireless networks. Today's computer hardware will require upgrades to support accelerated computing, providing a substantial market for AMD's products. Artificial intelligence is among the biggest technologies requiring accelerated computing. That's why AI demand supercharged AMD's sales in its fiscal third quarter, which ended Sept. 28, to a record $6.8 billion. This represented an 18% year-over-year increase. The company's semiconductor products are coveted since they boost the speed and efficiency of AI systems housed in data centers. As a result, AMD's data center sales reached record revenue of $3.5 billion, a 122% year-over-year increase. AMD is expanding its successful data center business through acquisitions. For example, it expects to close a deal to acquire ZT Systems in the first half of 2025. ZT Systems helps customers implement AI infrastructure. Thanks to demand for accelerated computing, AMD anticipates its Q4 revenue rising higher than Q3's record $6.8 billion to reach $7.5 billion. That's a double-digit increase over the prior year's $6.2 billion. CEO Hock Tan called 2024 "a transformative year for Broadcom." This was driven by two key factors: AI and its acquisition of VMware. The company acquired VMware in November 2023. VMware provides virtualization software, which enables IT organizations to run multiple operating systems on a single server. Broadcom is positioning this ability as a means for businesses to establish their own private cloud computing environment rather than use a public one owned by a conglomerate such as Microsoft. The approach is attracting customers. Broadcom's infrastructure business segment, of which VMware is a part, increased revenue by 196% year over year to $5.8 billion in the firm's fiscal fourth quarter, which ended Nov. 3. As for AI, the semiconductor giant's AI-related revenue rose 220% in fiscal 2024 to $12.2 billion compared to 2023's $3.8 billion. This AI demand helped the company's full-year sales reach record revenue of $51.6 billion, a 44% increase over fiscal 2023. The company's sales success enabled it to generate a strong free cash flow of $5.5 billion in Q4, up from $4.7 billion in the prior year. As a result, Broadcom raised its dividend 11% to $0.59 per share. Both AMD and Broadcom are excellent semiconductor companies, as evidenced by their strong sales growth. Owning stock in both is ideal, so picking just one is a tough choice. One factor to consider is valuation using the price-to-earnings (P/E) ratio. The P/E ratio tells you how much investors are willing to pay for a dollar's worth of earnings. Broadcom and AMD's P/E multiples are going in opposite directions as 2024 draws to a close. After Broadcom announced its impressive fiscal Q4 results, its share price skyrocketed, reaching a 52-week high of $251.88 on Dec. 16. This caused its P/E ratio to surge as well, and as a result, AMD shares look like the better value right now. On top of that, AMD has another potential advantage over Broadcom. Broadcom is particularly vulnerable to impending U.S. government tariffs and export restrictions on semiconductor products to China. Approximately one-third of its sales are to Chinese customers. In contrast, AMD's exposure to China is about half that of Broadcom at 15% of sales. While both possess thriving AI businesses, AMD's better valuation and lower exposure to risk in China give it the edge over Broadcom as the superior semiconductor stock to buy right now. That said, Broadcom is worth putting on your watch list to pick up shares when the stock price drops.

2 Stock-Split Stocks Billionaires Are Piling Into for 2025 | The Motley Fool

Two of Wall Street's hottest artificial intelligence (AI) stocks are on the buy list for some of Wall Street's top money managers. In a little over a week, investors will cross the finish line for what looks to be another phenomenal year for Wall Street. As of the closing bell on Dec. 19, the ageless Dow Jones Industrial Average, widely followed S&P 500, and growth stock-driven Nasdaq Composite had respectively gained 12%, 23%, and 29% on a year-to-date basis. While the rise of artificial intelligence (AI) has been the undisputed top catalyst behind Wall Street's outperformance in 2024, investor euphoria for companies enacting stock splits has played a very close second fiddle. A stock split is a tool publicly traded companies can utilize to adjust their share prices and outstanding share counts by the same factor. A company's market cap and underlying operating performance are unaffected by a split. Stock splits come in two forms -- forward and reverse -- with investors overwhelmingly favoring the former. A forward stock split reduces a company's share price to make it more nominally affordable for retail investors who aren't able to buy fractional shares through their brokers. Generally, companies completing forward splits have consistently out-innovated their competition, which a rising share price tends to indicate. This outperformance for stock-split stocks isn't lost on Wall Street's brightest money managers. As we prepare to barrel into 2025, billionaires are piling into two prominent stock-split stocks. The first stock-split stock that two top-notch billionaire money managers want to own as we head into 2025 is the premier company in artificial intelligence (AI)-networking solutions, Broadcom (AVGO 1.13%). Broadcom completed its first-ever split (10-for-1) in mid-July. Billionaire Philippe Laffont of Coatue Management, who oversees nearly $27 billion in assets under management, purchased 1,488,666 shares of Broadcom during the September-ended quarter. Meanwhile, Stanley Druckenmiller of Duquesne Family Office opened a new position totaling 239,980 shares. The lure for billionaire asset managers is that Broadcom's AI-networking solutions are the preferred choice for businesses. Its Jericho3-AI fabric can connect up to 32,000 graphics processing units (GPUs) to maximize their computing capabilities and minimize tail latency. Reducing lag/response time is especially important when AI-driven software and systems are making split-second decisions and running generative AI solutions. In fiscal 2024, which ended on Nov. 3, Broadcom generated $12.2 billion in AI sales. Over the next three years, CEO Hock Tan believes its three largest hyperscale customers could spend between $60 billion and $90 billion on custom AI chips, which would give it a sustainable double-digit sales growth runway. However, Laffont and Druckenmiller might also appreciate that Broadcom is far more than just an AI stock. Although artificial intelligence solutions account for the lion's share of its current growth, a significant portion of Broadcom's revenue comes from providing wireless chips for next-generation smartphones. It's also a key player in cybersecurity solutions and provides a laundry list of optical components and sensors to the industrial sector. As I've stated previously, if an artificial intelligence bubble were to take shape and burst, Broadcom would be better-positioned than direct players like Nvidia to deal with the outcome. Perhaps the one question for Broadcom to answer in 2025 is: Has its stock has come too far, too fast? Shares of the company are valued at close to 20 times trailing-12-month (TTM) sales, which is well above its average multiple to TTM sales over the last five years of 8.2. Annual growth rates, which are forecast in the mid-teens, might not leave much (if any) room for additional upside next year. The second stock-split stock that at least one prominent billionaire fancies ahead of the new year is customizable rack server and storage-solutions company Super Micro Computer (SMCI 1.12%). Supermicro completed its first-ever split (also 10-for-1) at the end of September. Perhaps it's no coincidence that Supermicro's buyer was Coatue Management's Philippe Laffont. His fund places an emphasis on cutting-edge growth stocks, and the 241,610 shares of Supermicro that were purchased by Coatue in the third quarter is consistent with this theme. Just as Broadcom has become the premier option in AI networking, Super Micro Computer has ascended the ranks as a top option for data center infrastructure. The company's customizable rack servers incorporate Nvidia's computationally superior GPUs, which has only enhanced demand for its products. In early August, Super Micro reported close to $15 billion in net sales for fiscal 2024 (ended June 30), which represented sales growth of 110% from the previous year. Based on Wall Street's current consensus, sales for the company may double to $30 billion by fiscal 2026. Although Super Micro Computer appears ideally positioned to benefit from the rise of AI, it's a stock-split stock that carries more risk than most. In late August, noted short-seller Hindenburg Research released a report that alleged Super Micro had engaged in "accounting manipulation, sibling self-dealing, and sanctions evasion." Following the release of this report, the company has delayed the filing of its fiscal 2024 annual report, seen its accounting firm Ernst & Young resign after previously raising concerns about internal controls at Supermicro, and is reportedly being probed by U.S. regulators, per The Wall Street Journal. If there's a silver lining here, it's that an independent special committee expects no financial restatements. But until the company's new auditor signs off on its financial statements, and those statements are filed with the Securities and Exchange Commission, there's an undeniable grey cloud hovering above Super Micro Computer. While it's possible Laffont could have nabbed himself a bargain for 2025, I suggest erring on the side of caution and keeping your distance until there are more definitive answers.

Better AI Stock: Broadcom vs. Nvidia

There are a lot of companies in the artificial intelligence (AI) space that are increasing their sales and earnings rapidly and providing a lot of value to their shareholders. Two that are achieving impressive results while carving out their niche in the AI market are Broadcom (AVGO 1.13%) and Nvidia (NVDA 3.08%). Both have their strengths, but if you have to choose just one, which is the better AI stock? Let's take a closer look to find out. The case for Broadcom Broadcom makes application-specific integrated circuits (ASICs) used in data centers to help some of the largest tech companies achieve generative AI capabilities. CEO Hock Tan said recently that his company is developing AI chips with three "very large" customers, each of which will deploy 1 million chips by 2027. Also, a recent report said that ChatGPT creator OpenAI is working with Broadcom to help develop its own in-house AI chips. All of this new demand from large tech companies comes on the heels of the company's already impressive AI growth. Broadcom's 2024 AI revenue soared 220% to $12.2 billion, and more could be on the way. Tan said on the fourth-quarter earnings call that the company believes the total market opportunity for Broadcom's AI chips and AI networking infrastructure could be between $60 billion and $90 billion in fiscal 2027 alone. That may sound like an exaggerated estimate from a company executive, but AI spending is soaring right now, with Goldman Sachs estimating tech companies will spend $1 trillion over the next few years to build out the AI infrastructure. The case for Nvidia Nvidia is one of the most popular AI stocks right now because of its lead in the semiconductor space. The company's graphics processing units (GPUs) have been used in data centers for years, and once tech giants began competing for generative AI dominance, the chips were even more in demand. An estimated 70% to 95% of AI data centers are using the company's GPUs, and this lead is making it very difficult for its rivals to catch up. Management is working hard to maintain that lead by releasing new AI hardware like its Blackwell chips. Chief financial officer Colette Kress said "every customer is racing to be the first" to deploy the new chips in their data centers. If you're skeptical that Kress' comments are just another executive touting their own products, results for the third quarter (which ended Oct. 27) prove her statement isn't just all talk. Sales spiked 94% to $35.1 billion, and adjusted earnings increased 103% from the year-ago quarter to $0.81. Those results were fueled by a 112% increase in data center revenue to $30.8 billion. Like Broadcom, Nvidia is benefiting from companies increasing their investment in AI infrastructure. And CEO Jensen Huang estimates these investments could reach $2 trillion over the next five years. Verdict: Nvidia is the better AI stock Many times when I compare two companies, it quickly becomes clear which one is the better buy. In this case, I think both stocks are great long-term AI investments. Broadcom and Nvidia are already tapping into the demand, and with spending increasing in the artificial intelligence sector, their lead in this space should continue to pay off for years to come. But I would choose Nvidia if I had to pick just one to invest in right now. It has been a longtime leader in AI chips, but its forward price-to-earnings ratio (P/E) of 30.3 is slightly cheaper than Broadcom's forward P/E of 35.3. It's worth noting that even with rising AI demand, there will still be some volatility with both of these stocks, especially as some investors inevitably cash in on some of the gains they have earned over the past few years.

EXCLUSIVE: Nvidia, Broadcom Tipped To Dominate AI Compute Wave By Kurv CEO - NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO)

Howard Chan highlights AI-driven chip demand and robust EPS growth potential for tech leaders. Move over, software darlings. The future of tech is being etched in silicon, and chipmakers like NVIDIA Corp NVDA and Broadcom Inc AVGO are writing the playbook. Howard Chan, founder and CEO of Kurv Investment Management, shared his exclusive insights with Benzinga, highlighting a sector where he said demand is outstripping supply: "We still favor the hardware or infrastructure side of the AI wave. Chipmakers and cloud computing service providers benefit from existing and future budgeted capital expenditure allocation." Is The Nasdaq-100 Overheating? Tech valuations have soared, leaving some investors wondering if growth can keep up. "Consensus EPS growth is 21% for Nasdaq-100, up from 15% this year. That might be a tall order, but, after all, they have delivered this for the past... 20 years," Chan said. Unlike other sectors buckling under high interest rates, tech titans boast robust balance sheets, giving them a cushion. Chan flags the second quarter as pivotal: "The base effect on EPS growth rates will be most obvious in Q2 when the rolling 12-month EPS might bottom." Read Also: Amazon, Meta, Alphabet, Spotify Lead JPMorgan's 2025 Tech Picks For AI Potential NVDA, AVGO: The Tech Titans To Watch Hardware companies such as Nvidia and Broadcom are uniquely positioned to lead the AI boom, according to Chan. "The demand for compute still outstrips the ability of makers to meet that demand. There's small sign of new entrants. However, it will take time for them to catch up." For investors tracking the sustainability of these gains, Chan offers a roadmap: "For hardware [NVDA/AVGO]: demand from the likes of TSLA/GOOGL/AMZN/META/MSFT." AI: Beyond Tech AI's impact isn't confined to tech. Chan sees a ripple effect, particularly in biotech and construction. "Directly, productivity will rise in service industries, although this might take a while as people need to be trained on it." Indirectly, AI investments will cascade into non-tech sectors, like construction, as companies expand to meet rising demand, he said. As the AI revolution heats up, Nvidia and Broadcom stand as the architects of the next wave, bridging the gap between soaring demand and supply constraints. With EPS growth expectations riding high and demand signals flashing green, the road ahead for tech's chipmakers may be paved in silicon gold. Read Next: OpenAI Takes A Page From Google's 2007 Playbook, Turns Phones Into AI Hotlines With 1-800-CHATGPT Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

3 No-Brainer AI Stocks to Buy Right Now | The Motley Fool

One of the biggest drivers in the market in 2024 was artificial intelligence (AI), and there is good reason to believe that AI stocks can continue to lead the charge in 2025. Despite recent advancements, AI is still in the early innings and the technology will only get better with time. Let's look at three still attractively valued AI stocks that look like no-brainer buys heading into 2025. While the market has been in a festive move to close out the year, the recent pullback in Nvidia (NVDA 3.08%) looks like a gift. The chipmaker has been the biggest beneficiary of the AI infrastructure buildout, as its graphic processing units (GPUs) provide the computing power for both training large language models (LLMs) and AI inference. While not the only GPU maker, Nvidia has created a wide moat though its CUDA software program. The company originally created the free software program as a way to expand beyond its core video gaming market so that customers could use its chips for other applications and it could sell more chips. This led CUDA to become the standard on which developers learned to program GPUs. This has helped Nvidia grab an approximate 90% market share in the GPU market. Nvidia's dominance in the GPU market has led to explosive revenue growth, including 94% last quarter. Meanwhile, that strong growth looks poised to continue as a number of large tech hyperscalers (companies that own massive data centers) and well-funded AI start-ups, such as OpenAI and Elon Musk-backed xAI, rush to build their AI infrastructure in pursuit of creating the best AI models. As these models become more advanced, they need exponentially more computing power, and thus GPUs, to be trained. Despite its huge growth, Nvidia still trades at an attractive valuation with a forward price-to-earnings (P/E) ratio of under 29 based on 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of approximately 0.9. A PEG ratio below 1 is typically considered undervalued, but growth stocks will quite often have PEG ratios well above 1. Another company benefiting from the AI infrastructure buildout is Taiwan Semiconductor Manufacturing (TSM 1.32%), or TSMC. Today many companies outsource the manufacturing of their chips, and TSMC has become the world's leading semiconductor contract manufacturer. The company is benefiting from the huge and increasing demand for AI chips, and is continuing to work to add capacity to keep up with demand. It is poised to benefit from any smartphone and hardware upgrade cycles needed to help run AI applications. Last quarter, the company saw its revenue increase by 36%. Manufacturing semiconductors is a capital-intensive business that requires both scale and technological expertise to succeed. While TSMC has flourished, rivals such as Intel and Samsung have struggled. This has led to TSMC becoming the clear leader in manufacturing advanced chips, and it counts the likes of Apple, Nvidia, and Broadcom among its largest customers. The company recently hit a nearly 65% market share, and it's even higher for advanced chips. TSMC's dominant position in the semiconductor manufacturing space has given it strong pricing power the past few years, which has helped boost its gross margin. Meanwhile, the company is set to raise prices next year once again. The stock is also attractively valued trading at a forward P/E of just above 22 based on 2025 analyst estimates and a PEG ratio of approximately 1.16. Alphabet's (GOOGL 1.54%) (GOOG 1.72%) cloud computing unit, Google Cloud, has thus far been a big AI winner. Cloud computing is a high-fixed-cost business that becomes much more profitable once it reaches scale. That is exactly what has been happening with Google Cloud, which last quarter grew its revenue by 35% to $11.4 billion while the segment's operating income surged from $266 million to $1.95 billion. The company has credited its cloud success to using a combination of GPU along with its customized tensor processing units (TPUs) to lower inference times and reduce costs. It noted customers are using its platform to customize their own AI models, while also embracing its Gemini model. Meanwhile, this month Alphabet has been showing off its innovation prowess. This included a breakthrough in quantum computing, which puts it in the lead in this intriguing new field, although it will still be a long time before quantum computing will impact revenue. In addition, the company introduced new cutting-edge updates to its AI image and video generation tools, as well as introducing its newest Gemini AI model. It said Gemini 2.0 can act as an autonomous AI agent and will be incorporated into search next year. Alphabet has long been the dominant player in search and it also has one of the largest video services in the world in YouTube. However, the company has finally started to get some recognition for its innovation. Nonetheless, it is still one of the cheapest megacap tech stocks, trading at at forward P/E of 22.

Is This Nancy Pelosi's Stock Pick Set To Overtake Nvidia? AI Chip Race To Heat Up By 2025 As Meta And Microsoft Look Beyond Jensen Huang's Chip Maker, Says Expert - Broadcom (NASDAQ:AVGO), Amazon.com (NASDAQ:AMZN)

Fund manager Stephen Yiu of Blue Whale Growth Fund has forecasted that Broadcom Inc. AVGO will yield substantial returns for investors by 2025, potentially surpassing AI chip heavyweight Nvidia Corporation NVDA. What Happened: Yiu said that tech giants like Microsoft Corporation MSFT, Amazon.com, Inc. AMZN, Google LLC GOOGL, and Meta Platforms Inc. META are looking to broaden their AI chip supplier base. Despite their substantial purchases of Nvidia's GPUs, these companies are now also creating their own custom chips for AI applications, CNBC reported on Monday. Yiu sees Broadcom as the next Nvidia in terms of potential outperformance, thanks to its strong partnerships with major tech firms. "Nvidia's GPUs are very powerful, but at the same time also very expensive," Yiu noted. "From Microsoft's perspective, you don't want to become overly dependent on one single supplier." See Also: Warren Buffett Says A Surge In People Doing 'Big Dumb Things' Is Tied To Historically Easy Access To Other People's Money Broadcom's year to date returns have climbed 103.42% this year, as of Monday pre-market hours, according to Benzinga Pro. It hit a market cap of over $1 trillion after announcing that its AI revenue tripled to $12.2 billion in 2024. The company is working with three major cloud computing customers, Meta, Alphabet, and ByteDance, to develop custom AI chips. Despite still holding an investment in Nvidia, Yiu has significantly cut it from nearly 10% of his fund's portfolio. He views Broadcom as a more attractive investment opportunity due to its smaller size. "For a $1 trillion company to grow 50% to become $1.5 trillion is reasonable. But for Nvidia to do that, they would need to add another $1.5 trillion, which is a very big number," he elaborated. Why It Matters: Broadcom's CEO Hock Tan has expressed strong confidence in the sustainability of the AI boom. Big tech companies like Google, Meta, and ByteDance are investing heavily in designing custom processors to accelerate the training and deployment of AI systems. Even OpenAI and Apple have partnered with Broadcom to develop their AI server chips, diversifying their exposure to Nvidia. Kurv Investment Management's CEO Howard Chan recently mentioned that chipmakers like Nvidia and Broadcom are leading the AI wave. He noted that demand is outstripping supply in this sector, benefiting chipmakers and cloud computing service providers. Former House Speaker Nancy Pelosi (D-Calif.), known for her active stock market investments as a member of Congress, disclosed in June that she had acquired call options on Broadcom. These options, adjusted to a strike price of $80 after a 10-for-1 stock split, are set to expire in June 2025. Pelosi, a widely followed Congressional trader, has drawn significant attention to her stock holdings, inspiring dedicated Pelosi portfolio trackers. Read Next: Bitcoin, Ethereum, XRP, Dogecoin Recover From Day's Losses: 'If This Is The Christmas Sell Off And The Top, So Be It,' Trader Says Image via Shutterstock Market News and Data brought to you by Benzinga APIs

3 Artificial Intelligence Stocks That Lagged in 2024 but Are Set to Soar in 2025 | The Motley Fool

As in 2023, investors were once again captivated by the potential of artificial intelligence (AI) in 2024. But not every stock has benefited. Sure, Nvidia and Broadcom have had great years, but not every AI beneficiary was as fortunate. Why would that be? For one, many traders look at results in the here and now. So, if a company had a near-term slip-up or a slowdown, their stocks were likely punished -- even if AI should provide a long-term tailwind for their business. The following three examples were laggards in 2024, but looking ahead to 2025, they appear to be excellent pickups on the dips. There would be no AI semiconductors at all without the extreme ultraviolet lithography (EUV) tools provided by ASML Holdings (ASML -0.65%), which has a monopoly on this crucial chipmaking technology. In that light, why would ASML's stock be down about 4% on the year and 35% from all-time highs? The market appears to be honing in on a few short-term concerns. The first is China, where ASML has seen a surge of older and less-sophisticated deep ultraviolet lithography (DUV) sales in recent years, ahead of more stringent restrictions placed on equipment from China this year. Although ASML will continue selling to China, they will no longer be able to sell or service several types of machines, so that pull-in of China sales this year could lead to ASML's China revenue declining next year. In addition, while the AI market is booming, larger, mature chip markets, like smartphones and PCs, have continued to languish for longer than expected in their post-pandemic lull. That recently led some foundries to pull back a bit on their near-term spending plans. However, ASML still projects growth next year, even if it's lower than previously expected. More importantly, at the company's recent investor day, management kept its 2030 revenue and earnings targets intact. Advanced chip production will now require more EUV machines versus DUV machines, and EUV machines are higher-revenue and higher-margin for ASML. Even better, ASML's higher-priced high numerical aperture (NA) EUV machines, which go for about twice the price of the low-NA EUV machines in use today, have just started selling this year. The growth and increasing mix of advanced EUV machines should lead to margin expansion, fueling solid profit growth through this decade at least. With the long-term picture intact and ASML's competitive position nearly assured, long-term investors should buy this dip with both hands. Artificial intelligence applications will have to reference lots of data and make sense of it all incredibly quickly, which will put a lot of importance on how that data is stored in a database. MongoDB (MDB 0.26%) has a disruptive architecture for databases, called a document architecture, which allows for more intuitive organization of unstructured data than the traditional SQL (structured query language) database, which stores data in a more restrictive row-and-column format. If one thinks about the kinds of data relationships AI agents will have to retrieve and make sense of, MongoDB's document databases look increasingly better. Not only that, AI has recently made it much easier for enterprises to migrate legacy applications from traditional databases to MongoDB. To date, that has been a complex process leading to customer friction. Despite these positives, MongoDB's stock is down 35% year to date and more than 50% below its all-time high. Why would that be? According to management, the uncertain macro environment and companies figuring out what to do with AI have caused a slowdown in MongoDB Atlas usage. Basically, while companies are experimenting and learning about AI's potential, very few "killer app" AI software applications have caught on as of yet. However, as AI improves and companies increasingly figure out how to deploy AI applications, AI app usage should take off. As a majority of MongoDB's revenue comes from its usage-based Atlas database-as-a-service, MongoDB will see the benefit in the building and usage of AI apps. However, we are not quite at that stage. CEO Dev Ittycheria noted on the recent conference call with analysts that while many AI apps don't yet have good product-market fit, some are beginning to, with Ittycheria highlighting one such app built on MongoDB that has grown 10 times over the course of the year. As the AI revolution moves from the infrastructure buildout to software applications, MongoDB should see an acceleration in usage. Trading near a historically low price-to-sales ratio of around 10, MongoDB could see a bounce-back year in 2025. Most don't equate On Semiconductor (ON 1.08%) with AI, as its biggest business is in power chips for the automotive industry. Specifically, onsemi is the current leader in producing chips from silicon carbide (SiC), a material that's somewhat difficult to produce but is much more conductive and heat-resistant than traditional silicon. SiC is thought to be crucial for future electric vehicles (EVs), and given the big slowdown in the EV market, onsemi is down 20% on the year and 40% off its all-time highs. But with the extreme electricity demands of AI data centers and the latest AI chips generating tons of heat, silicon carbide is now making its way into power control systems for AI data centers, too. This year, onsemi unveiled its EliteSiC 650V MOSFET for AI data centers, and management has invested early to get behind this trend. While AI data centers are a small portion of onsemi's revenues today, look for that to get bigger over time. Meanwhile, onsemi doesn't just make power chips; it makes sensors, too, especially for intelligent sensing needed in advanced driver assistance systems (ADAS) for modern cars and trucks. And while 2024 was a down-cycle year for the auto industry overall, onsemi did land several large and important customer wins, including a huge multiyear deal with Volkswagen, the largest automaker in the world by revenue, and deals with Subaru and Denso, the world's second-largest auto systems supplier. At just 16.5 times bottom-of-the-cycle earnings, look for onsemi to outperform when the auto and EV markets recover and the company's chips make their way into more AI applications.

Prediction: 1 Struggling AI Stock to Buy in December Could Make Investors a Fortune in 2025 | The Motley Fool

Applied Materials (AMAT 1.33%) is one of the few stocks related to artificial intelligence (AI) that has retreated this year. Shares are down 37% from their all-time high as of this writing. The equipment supplier for semiconductor manufacturing facilities is getting hit over fears the U.S. government will bar it from selling products to China, one of its most important markets. Outside of AI, the wider semiconductor market has gone through a downturn, hurting revenue growth for semiconductor equipment makers. The shortsighted thinking driving this sell-off creates a buying opportunity for a stock that has made investors a fortune over the long term. Manufacturers will need more and more of Applied Materials' equipment to keep making advanced computer chips, which will lead to increased revenue and profits for the business. Here's why beaten-down AI stock Applied Materials is set to bounce back in 2025. The U.S. and Chinese governments are at odds over semiconductor policies. Both countries are steadily restricting product sales related to semiconductors to the other in order to get an advantage in national security areas such as defense spending and AI. Applied Materials is right in the middle of this conflict. The company sells equipment that allows semiconductor manufacturers to build, shape, and analyze their products. This is highly advanced technology that enables complicated engineering to happen at the microscopic level, helping the likes of Nvidia and other computer chip companies bring their designs to market. In the face of these export restrictions, it looks like Chinese companies ordered a bunch of Applied Materials equipment in advance. Revenue from China hit 44% of overall revenue in fiscal 2023 Q4 compared to a historical rate of around 30%. And in the recently ended fiscal 2024, revenue from China made up 37% of overall sales. Investors see this large chunk of revenue coming from China and worry about the export restrictions. What happens if Applied Materials can't sell its equipment to such an important market? Will it lose more than a third of its revenue overnight? While the China restrictions are a concern to keep track of, I believe they can be more than made up through AI and reshoring demand. AI data center spending is exploding higher as the big technology players race to stay ahead in this exciting new technology. All these data centers require advanced computer chips to operate, and those chips need the use of Applied Materials machines to be manufactured. The key players in the AI space produce chips in Taiwan, South Korea, and the U.S. Combined, these countries made up 51% of Applied Materials' revenue last quarter. As the technology grows, it can offset some of the revenue decline from China. There is also the reshoring boom as the U.S. government tries to revive domestic semiconductor manufacturing as a national security priority. Companies are slated to spend tens of billions of dollars -- likely hundreds of billions of dollars in total -- over the next decade in order to build these factories. A lot of this spending will be on equipment machines, such as the ones made by Applied Materials. Imports of semiconductor equipment to the U.S. have exploded higher in the last few months, indicating this boom in spending has already begun. If the risks around China do fully materialize, I have faith the boost in spending from AI and American manufacturing will be able to replace the lost revenue for Applied Materials. Applied Materials has a long history of treating shareholders well. It simultaneously invests in research to maintain its technological lead in semiconductor equipment while also returning capital to shareholders through buybacks and dividends. The stock has returned nearly 500,000% for shareholders since its IPO for a reason. Yes, you read that right -- close to a 500,000% total return over its 52 years as a publicly-traded company. And over the last 10 years, the company has brought its share count down by 33%, which helps boost earnings and dividends per share. Today, the stock trades at a price-to-earnings ratio (P/E) of just below 19. Management has committed to returning 80% to 100% of its future free cash flow to shareholders through buybacks and dividends. An attractive valuation, consistent capital returns, and strong growth prospects are a recipe for long-term share price appreciation. Buy Applied Materials as a turnaround play for 2025 and the rest of this decade.

History Says the Nasdaq Could Soar in 2025: 2 AI Stocks to Buy Before It Does. | The Motley Fool

According to data from CNBC going back to 1980, the Nasdaq and other benchmark indexes have historically risen in the months following a presidential election. This trend has continued in 2024, with the tech-heavy index up by around 10% since Donald Trump's win on Nov. 5. A new administration can mean less political uncertainty, making many market participants more comfortable holding assets in general. There is no guarantee that the Nasdaq's momentum will continue in 2025. But as Wall Street continues to pour money into AI tech, Advanced Micro Devices (AMD 0.28%) and Amazon (AMZN 0.73%) are two stocks could ride the wave into another year of stellar growth. Let's dig deeper. With shares down 13% this year, AMD is a chipmaker that somehow missed out on much of the generative AI rally despite being a big player in the hardware side of the opportunity. The chipmaker's diversified business model makes it a great alternative to Nvidia. And a reasonable valuation is icing on the cake for investors. AMD's third-quarter revenue grew by a modest 17% year over year to $6.8 billion. However, this consolidated number might hide the spectacular performance of its data center segment, which soared 122% to $3.5 billion, driven by sales of advanced graphics processing units (GPUs) for running and training AI algorithms. Management plans to drive continued data center growth by releasing new, more advanced chips, such as the Instinct MI325X series, designed to compete with Nvidia's Blackwell. With 51% of revenue coming from data center sales, AMD is much more diversified than Nvidia, which earned around 88% of its third-quarter sales from the data center segment. While AMD's less AI-driven business model has led to slower near-term growth, it will make the company much more resistant to a potential slowdown in the industry. AMD's forward price-to-earnings (P/E) multiple of 25 is also lower than Nvidia's, which is around 31 times forward earnings. While AMD is diversified within the technology hardware industry, Amazon takes diversification to another level with footprints in e-commerce, cloud computing, and AI infrastructure. Management's cost-cutting efforts have put the company in an excellent position to execute its long-term strategy and return value to investors. Under the leadership of CEO Andy Jassy, who took the helm in early 2021, Amazon has pivoted from a growth-at-all-costs strategy to one that prioritizes sustainable profitability. Several years of layoffs and fulfillment-network optimization have worked wonders on its operational results. While Q3 earnings increased by 11% year over year to $158.9 billion, operating income soared 64% to $17.4 billion. The cloud-computing segment, Amazon Web Services (AWS), continues to be the cornerstone of Amazon's bottom line -- representing $10.4 billion in operating income. And there is plenty of room for continued growth. AWS gives Amazon exposure to the picks-and-shovels side of the AI opportunity, allowing it to essentially "rent out" Nvidia GPU computing power to AI start-ups. This strategy shields Amazon from some of the risks involved in trying to compete in the more speculative software side of the industry. Amazon has also developed its own AI chips called Trainum and inferentia, which can offer customers cost-savings for specific workloads and reduce its dependence on suppliers like Nvidia. Since the launch of OpenAI's ChatGPT in late 2022, the generative AI industry has minted its share of millionaires. The hype cycle can easily continue in 2025. That said, investors should remember AI is still a highly speculative industry. And it is unclear how much longer companies will maintain their elevated spending levels on research and hardware. Companies like AMD and Amazon are ideal for the long term because they give investors exposure to the picks-and-shovels side of this opportunity while maintaining potentially safer, diversified business models.