Meet the Latest Supercharged AI Stock I Bought During the Stock Market Downturn

1 month ago 11

Keithen Drury, The Motley Fool

Fri, Apr 25, 2025, 6:45 AM 4 min read

There are plentifulness of stocks connected merchantability close present with the marketplace good disconnected its all-time highs. One of the stocks I added to my portfolio a portion backmost owed to little prices was Broadcom (NASDAQ: AVGO), though its terms contiguous is little than erstwhile I purchased it. I'd inactive see adding to my presumption today, arsenic it's an unthinkable AI institution with a agleam future.

With immoderate stock, I'm not acrophobic astir what the banal terms does a week oregon a period aft I acquisition it. Instead, I'm focusing connected a three- to five-year clip frame, and Broadcom's outlook during that play is rather strong.

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Broadcom has its fingers successful galore industries. Its products scope from mainframe bundle to net connectivity to retention systems. However, I'm astir focused connected its emerging merchandise enactment for artificial quality (AI) exemplary training. Broadcom is utilizing its spot plan expertise to assistance companies successful producing their ain customized AI accelerators, which Broadcom calls XPUs.

XPUs are akin to graphics processing units (GPUs), which are inactive the astir fashionable prime erstwhile it comes to grooming AI models. However, XPUs tin outperform GPUs erstwhile the workload is decently acceptable up. In the aboriginal days of AI training, the AI hyperscalers were each attempting to fig retired the astir businesslike mode to bid these models. So, having a flexible computing instrumentality similar a GPU was critical.

Now, these hyperscalers person an thought of however to bid their respective AI models, truthful gathering a instrumentality tailored to that computing method allows them to bid AI models much efficiently. Furthermore, due to the fact that the plan enactment is done betwixt Broadcom and its client, clients don't person to wage specified sky-high premium arsenic they bash with Nvidia (NASDAQ: NVDA), the existent GPU person that has made a monolithic nett from its devices.

Broadcom's absorption squad sees a monolithic marketplace for these GPUs and different connectivity switches utilized successful information centers. In its fiscal 2024, Broadcom generated $12.2 cardinal successful gross from this sector, up from $3.8 cardinal successful 2023. However, absorption believes this conception could person an addressable marketplace of $60 cardinal to $90 cardinal by fiscal 2027, which would bespeak monolithic growth.

There's a cardinal constituent successful that $60 cardinal to $90 cardinal projection: It lone comes from 3 clients. With 2 much hyperscalers slated to motorboat their XPUs this twelvemonth and 2 much selecting Broadcom arsenic a spouse for their XPUs, this marketplace scope volition dramatically grow from the existent projection.