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Fund manager Stephen Yiu of Blue Whale Growth Fund have predicted it Broadcom Inc. (NASDAQ:AVGO) will provide significant returns for investors by 2025, potentially surpassing AI chip heavyweights Nvidia Corporation (NASDAQ:NVDA).
What happened: Yiu said tech giants like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Google LLC (NASDAQ:GOOGLE), and Meta Platforms Inc. (NASDAQ:META) wants to broaden its supplier of AI chips. Despite their significant purchases of Nvidia’s GPUs, these companies are now also creating their own custom chips for AI applications, CNBC reported on Monday.
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Yiu sees Broadcom as the next Nvidia in terms of potential outperformance, thanks to its strong partnerships with major technology companies.
“Nvidia’s GPUs are very powerful, but also very expensive,” noted Yiu. “From Microsoft’s perspective, you don’t want to become too dependent on a single vendor.”
Broadcom’s year-to-date return has climbed 103.42% this year, as of Monday’s trading hours, according to Gasoline Pro. It reached a market capitalization of over $1 trillion after announcing that its AI revenue would triple to $12.2 billion by 2024. The company is working with three major cloud computing customers, Meta, Alphabet and ByteDance, to develop custom AI chips .
Although he still has an investment in Nvidia, Yiu has pared 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 $1.5 trillion is reasonable. But for Nvidia to do that, they would have to add another $1.5 trillion, which is a very large number,” he elaborated.
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Why it’s important: Broadcom CEO 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 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.
