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Fund manager Stephen Yu to Blue Whale Growth Fund He expected that Broadcom Company (Nasdaq:Afgo) will generate significant returns for investors by 2025, potentially surpassing the heavyweights of AI chips Nvidia company (Nasdaq:NVDA).
What happened: Yu said that the technology giants love Microsoft Corporation (Nasdaq:MSFT), Amazon.com, Inc. (Nasdaq:Amzn), Google LLC (Nasdaq:Google), and Meta Platforms Inc (Nasdaq:dead) are looking to expand their AI chip supplier base. Despite their large purchases of GPUs from Nvidia, these companies are now also creating their own custom chips for AI applications, CNBC reports. I mentioned on monday.
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Yu sees Broadcom as the next Nvidia player in terms of potential outperformance, thanks to its strong partnerships with major technology companies.
“Nvidia GPUs are very powerful, but at the same time they are also very expensive,” Yu noted. “From Microsoft’s perspective, you don’t want to become overly dependent on one single supplier.”
Broadcom’s year-to-date revenue is up 103.42% this year, as of pre-market hours Monday, according to Benzinga Pro. Its market capitalization has reached more than $1 trillion after announcing that its AI revenue will triple 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.
Although he still maintains an investment in Nvidia, Yiu has significantly reduced it from roughly 10% of his fund’s portfolio. He views Broadcom as a more attractive investment opportunity given its smaller size.
“For a trillion-dollar company to grow 50% to become a $1.5 trillion business is reasonable. But for Nvidia to do that, it would need to add another $1.5 trillion, which is a very large number.
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Why it matters: CEO of Broadcom Hook tan He has He expressed strong confidence In sustaining the artificial intelligence boom. Big tech companies like Google, Meta, and ByteDance are investing heavily in designing custom processors to speed up the training and deployment of AI systems. OpenAI and Apple even partnered with Broadcom to develop their own AI server chips, diversifying their exposure to Nvidia.
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