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Fund manager Stephen Yiu of Blue whale growth fund has predicted it Broadcom Inc. (NASDAQ:AVGO) will yield substantial returns for investors by 2025, potentially outperforming AI chip heavyweights Nvidia Corporation (NASDAQ:NVDA).
What happened: Yiu said the tech giants like it Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Google LLC (NASDAQ:GOOGLE), i Meta Platforms Inc. (NASDAQ:TARGET) are looking to expand their AI chip supplier base. Despite their big purchases of GPUs from Nvidia, these companies are also creating their own custom chips for AI applications, CNBC informed on Monday
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Yiu sees Broadcom as the next Nvidia in terms of potential performance, thanks to its strong partnerships with major technology companies.
“Nvidia GPUs are very powerful, but also very expensive,” Yiu noted. “From Microsoft’s perspective, you don’t want to be too dependent on one vendor.”
Broadcom’s year-to-date returns are up 103.42% this year, as of Monday’s premarket hours, according to Benzinga Pro. It reached a market cap of more than $1 trillion after announcing that its AI revenue would triple to $12.2 billion by 2024. The company works with three major cloud computing customers, Meta , Alphabet and ByteDance, to develop custom AI chips.
While he still maintains an investment in Nvidia, Yiu has reduced it significantly from nearly 10% of his fund’s portfolio. He sees Broadcom as a more attractive investment opportunity 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’d have to add another $1.5 trillion, which is a very big,” he explained.
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Why it matters: CEO of Broadcom 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 speed up 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.
