Kevin SimpsonBroadcomAVGOPARTIAL SELLMar 08, 2024

One of her favourite ways to participate in next AI buildout stage. Critical supplier of AI chips and network equipment. Despite volatility, great upside potential. New chip developed for OpenAI touted to be more efficient than Blackwell. Highlights shift to custom-designed chips for high-tech companies. 

Valuation more reasonable after pullback. A picks-and-shovels play. About 44% upside potential. Ranks 10/10. Yield is 0.70%.

It has $20 EPS power. AVGO's AI semi pipeline is $100 billion. MU is a new position for her, small and volatile, but they have $100 billion in bookings for the rest of the year, a lot of contracts. They're in the sweet spot of the AI memory shortage.

The AI chips are an increasingly competitive space. Earnings went from 40x PE to around 13% with high growth. It's a value play in AI with high growth, though don't expect the recent move to be repeated.

Apple, Google and others want to make their own chips and not depend on Nvidia and pay more for chips.  AVGO is a major player in AI and this will continue.

It was expected to be a major competitor to Nvidia. It is still a designer and doing well in the field. He has a price target of $509 which has decent upside. You could take an initial position at $375 and buy more as it drops.

Still likes it at these levels, he'd put $$ in today. Models quite a bit of upside to over $400. Will continue to benefit from the demand for chips. Expected to grow at more than 60% over next 3-4 years. 

Tried to corner the market by introducing some products that were not as open source, and the market pushed back. That's why it hasn't been able to accelerate its networking business as much as expected. Earnings disappointed. They'll turn it around, more to come on networking. Interesting on this pullback.

She owns players with more upside.

Five of the last six quarters, the name has been down. 90% of analysts like this stock. The price target has jumped from $700 to nearly $1,200 in 30 days. It is priced for perfection.

From a value point of view, NVDA sticks out as cheaper (~22x PE) in the space. But he's been reducing his exposure to the sector. The capex isn't slowing down anytime soon. When the music stops on this, you have to be really wary. Cyclical. Very cautious on semis.

Primary reason was guidance. There's also an element of profit-taking, as smart money takes $$ off the table. Look at the chart -- stock's up ~100% in a year. Good company, but he wouldn't be buying here.

Careful. It trades at 32x forward PE, well above its average of 18x. The stock is rising because Alphabet says it will continue to spend; GOOG is 13% of AVGO's overall revenue. AVGO's revenue growth in 2026 is 62%, but this will moderate in 2027 (estimated at 28%) and 2028.

It is second place in the semi conductor space for GPU's and can design them a little cheaper than NVDA. Has owned historically as a good financial model but now more for growth in AI. Has made strong acquisitions and has partnerships with Google and META.