Benzinga and Yahoo Finance LLC may earn commission or revenue on certain items through the links below.
Fund manager Stephen Yiu oh Blue Whale Growth Fund predicted that Broadcom Inc. (NASDAQ:AVGO) will generate significant returns for investors by 2025, potentially surpassing AI chip heavyweights Nvidia Corporation (NASDAQ:NVDA).
What Happened: Yiu said that tech giants like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Google LLC (NASDAQ:GOOGLE), a Meta Platforms Inc. (NASDAQ:META) are looking to expand their AI chip supplier base. Despite their significant purchases of Nvidia GPUs, these companies are now also creating their own custom chips for AI applications, CNBC reported on Monday.
Don't Miss:
Yiu sees Broadcom as the next Nvidia in terms of potential outperformance, thanks to its strong partnerships with major technology companies.
“Nvidia GPUs are very powerful, but at the same time also very expensive,” noted Yiu. “From Microsoft's point of view, you don't want to become overly dependent on one single supplier.”
Broadcom's year-to-date earnings have climbed 103.42% this year, from pre-market hours on Monday, according to Benzinga Pro. It reached a market cap of over $1 trillion after announcing that its AI revenue would triple to $12.2 billion in 2024. The company is working with three major cloud computing customers, Meta, Alphabet, and ByteDance, to develop dedicated AI chips.
Despite holding an investment in Nvidia, Yiu has cut it significantly from almost 10% of his fund's portfolio. He sees Broadcom as a more attractive investment opportunity because of its smaller size.
“It's reasonable for a $1 trillion company to grow 50% to become $1.5 trillion. But for Nvidia to do that, they would need to add another $1.5 trillion, which is a very large number,” he elaborated.
Tends to: Arrived Home Private Credit Fund has historically paid an annual dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate with a minimum of just $100.
Why It's Important: CEO of Broadcom Hock Tan have 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 speed up the process of training and deploying AI systems. Even OpenAI and Apple have partnered with Broadcom to develop their AI server chips, diversifying their exposure to Nvidia.