2 artificial intelligence (AI) stocks divided into stocks are buying Wall Street billionaires

Billionaire Stanley Druckenmiller of Duquesne Family Office topped the S&P 500 (SNPINDEX: ^GSPC) by 50 percentage points over the last three years. He bought 239,980 shares of Broadcom (NASDAQ: AVGO) during the third quarter, and is now among the top 15 holdings.

Billionaire Steven Cohen of Point72 Asset Management outperformed the S&P 500 by 30 percentage points over the past three years. He bought 211,823 shares of Arista Networks (NYSE: ANET) in the third quarter, and is now among the top 10 holdings.

Importantly, Broadcom and Arista are key providers of artificial intelligence (AI) infrastructure and have seen their stock prices roughly quadruple in the past two years. Both companies completed stock splits in 2024 to restore their high stock prices.

Here’s what investors should know about these AI stocks.

Broadcom is one semiconductor and the software company best known for its network chips and application-specific integrated circuits (ASICs). It has an 80% revenue share in Ethernet switching and routing (networking) chipsets, which move information through data centers. This market could grow by up to 30% annually as companies grow artificial intelligence (AI), depending on the infrastructure JPMorgan Chase.

Broadcom, meanwhile, has roughly 60% market share in high-end ASICs, which are custom chips designed specifically for specialized use cases, particularly accelerating artificial intelligence workloads. Broadcom currently designs chips for three hyperscalers, a term that refers to companies with massive data center footprints. Although these hyperscalers have no name, most analysts suspect that they are the parents of Google alphabetTikTok parent ByteDance and Metaplatforms.

Importantly, Broadcom CEO Hock Tan recently said that revenue from these three hyperscalers could reach $60 billion to $90 billion in 2027, up from $12.2 billion in 2024. This implies growth annual between 70% and 95%. But Tan also said Broadcom was reportedly working on two new hyperscalers Apple and OpenAI, which could be revenue-generating customers by 2027. This means that sales of AI chips could grow at a triple-digit rate in the next three years.

Wall Street expects Broadcom’s adjusted earnings to rise 22% annually through 2027. That consensus makes the current valuation of 47 times adjusted earnings look reasonable, but also leaves room for upside if Broadcom beats its guidance on sales of custom AI chips. That’s why patient investors should consider buying some shares of this stock today.

Arista is a networking company known for providing Ethernet switches for hyperscalers Microsoft and Meta Platforms, although it has other high-profile clients such as Alphabet, Oracleand SpaceX. The company is a revenue leader in high-speed Ethernet switches, meaning 100 gigabits per second and faster. High-speed networks are essential for AI workloads.

important, Cisco systems remains the leader in the global Ethernet switching space, but Arista has three times more market share in the high-speed category. This dominance is due in part to its Extensible Operating System (EOS). All Arista hardware runs a single version of EOS, but Cisco uses multiple operating systems, which can complicate network management.

Looking ahead, Arista says its total addressable market will grow 14% annually through 2028. Artificial intelligence will undoubtedly be a major driver of growth. Hyperscalers are investing heavily in AI infrastructure to ensure they remain competitive. However, Arista should also benefit as smaller companies modernize their networks to support ever-increasing numbers of connected devices.

Wall Street expects Arista’s adjusted earnings to grow 17% annually through 2027. That makes the current valuation of 53 times adjusted earnings look expensive. But I think analysts are underestimating future earnings. Arista beat consensus estimates in the past 15 quarters, and its reported earnings were 14% above expectations on average over the past six quarters. Patient investors should consider buying a small position today.

Ever feel like you’ve missed the boat on buying the hottest stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock. recommendation for companies that believe they are about to exit. If you’re worried you’ve already missed your investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves:

Nvidia: if you invested $1,000 when we doubled in 2009, you would have $363,307!*
Apple: if you invested $1,000 when we doubled in 2008, you would have $45,963!*
Netflix: if you invested $1,000 when we doubled in 2004, you would have $471,880!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another opportunity like this anytime soon.

See 3 “Double Down” actions »

* Stock Advisor returns from January 6, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former CMO and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine holds positions at Arista Networks. The Motley Fool has positions in and recommends Alphabet, Apple, Arista Networks, Cisco Systems, JPMorgan Chase, Meta Platforms, Microsoft and Oracle. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has one disclosure policy.

2 artificial intelligence (AI) stocks divided into stocks are buying Wall Street billionaires was originally published by The Motley Fool

Source link