Chipmaker Nvidia is clearly the poster child for artificial intelligence, according to one portfolio manager — but she says another firm is being overlooked. Liontrust Asset Management’s Clare Pleydell-Bouverie has turned her attention to Broadcom Inc , which manufactures and designs semiconductors.
”[We] think of Nvidia as the poster child for AI chips, and they are. But, [Broadcom] was another company that posted over a billion in revenue from AI chips,” Pleydell-Bouverie told CNBC’s Pro Talks . “It’s often overlooked that Broadcom is the second-largest manufacturer of semiconductors industry-wide.” Shares in Nasdaq-listed Broadcom are up around 26% year-to-date and almost 80% in the last 12 months.
They are currently trading at around 30 times forward earnings, while Nvidia has a multiple of 45, according to FactSet data. For the first quarter , Broadcom said revenue came in at $11.96 billion , topping analysts’ forecasts of $11.72 billion. On the analyst call , Broadcom CEO Hock Tan said the firm expects to make $10 billion in AI-related chips this year. AVGO YTD mountain Year-to-date share movement in Broadcom Pleydell-Bouverie flagged that the company has a “leading position” in segments like custom ASICs (Application-Specific Integrated Circuits).
“When we think about Meta Platforms and Alphabet ’s Google developing their own chips, there’s been a lot of coverage on this and whether they’re going to rival some of the some of the merchants, silicon providers [and] they’re doing this alongside Broadcom,” she added. Beyond this, the portfolio manager sees Broadcom emerging as a leader in the networking chips domain thanks to its “best in class” semiconductors powering the ethernet network.
Pleydell-Bouverie co-manages Lionstrust’s global tech, innovation and dividend funds. For the year to March, all three funds beat their benchmark indexes, with the Liontrust Global Technology Fund rising 51.9%, compared to the MSCI World Information Technology Index’s 39.1%. ‘Among the cheapest’ Analysts from Bernstein said this week that they expect Broadcom shares to continue to gain this year. The company’s valuation “remains compelling, inline with history vs industry for a story that has only gotten better with age,” analyst Stacy Rasgon said, naming the chipmaker as a top stock idea.
He has an outperform rating on Broadcom at a target price of $1,600, implying upside of around 13%. On top of that, it “remains among the cheapest of all the ‘AI play’ semis, with a better narrative than many peers,” the analyst said. According to FactSet data, of 41 analysts covering the stock, 33 give it a buy or overweight rating, while 8 have a hold call. Their average price target is $1,562.62, giving it around 10% potential upside. — CNBC’s Fred Imbert contributed to this report.
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