Broadcom: The Overlooked Giant Challenging Nvidia in AI Race

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Broadcom: The Overlooked AI Powerhouse

It’s no secret that Nvidia is a leader in artificial intelligence (AI), but one portfolio manager believes another firm has been flying under the radar. Liontrust Asset Management’s Clare Pleydell-Bouverie is turning the spotlight on Broadcom Inc., a semiconductor giant that may not garner the same headlines but holds a commanding presence in the AI market.

Hidden Gem in the AI Landscape

“Nvidia is often seen as the face of AI chips, and rightly so,” Pleydell-Bouverie told LA News Center. “However, Broadcom is another company that quietly generated over a billion dollars in revenue from AI chips.”

Despite its significant contribution to the AI industry, Broadcom remains overlooked. Yet, it is a major player, ranking as the second-largest semiconductor manufacturer across all industries.

Impressive Financial Performance

Broadcom’s stock has surged by a robust 26% year-to-date and a staggering 80% in the past 12 months. Despite its rally, it trades at a price-to-earnings ratio of around 30, making it more attractive than Nvidia’s multiple of 45.

In its first quarter, Broadcom reported revenue of .96 billion, surpassing analyst estimates. The company’s CEO, Hock Tan, projected that Broadcom will generate billion in AI-related chips this year.

Leadership in Custom Chips

Pleydell-Bouverie highlights Broadcom’s dominant position in custom ASICs (Application-Specific Integrated Circuits). Meta Platforms and Alphabet’s Google have made headlines for developing their chips to compete with silicon providers. However, Broadcom remains a key partner in these endeavors, working alongside these tech giants.

Furthermore, Broadcom is emerging as a leader in networking chips, thanks to its best-in-class semiconductors powering ethernet networks.

Top Industry Performers

Liontrust’s global tech, innovation, and dividend funds have consistently outperformed their benchmarks. Pleydell-Bouverie co-manages these funds and attributes their success to strategic investments in companies like Broadcom.

Positive Analyst Outlook

Analysts are bullish on Broadcom’s prospects. Bernstein analysts predict continued gains for the company’s stock this year, valuing it as a compelling and undervalued investment. They rate Broadcom as an outperform with a target price of ,600, indicating a potential upside of 13%.

Out of 41 analysts covering Broadcom, 33 recommend it for buying or overweighting, while only 8 have a hold rating. Their average target price places around 10% upside potential.

Conclusion

While Nvidia may be the undisputed poster child for AI chips, Broadcom is an equally impressive player in the market. Its strong financial performance, leadership in custom ASICs, and innovative ethernet chips make it an overlooked gem with significant growth potential. As AI continues to shape our world, Broadcom is a company that should not be underestimated.

Data sourced from: cnbc.com