Afraid You Missed the AI Boom? This Late-Cycle Winner Could Be Your Second Chance.

• While Nvidia's GPUs helped powerfulness the AI boom, priorities person begun to shift.

• Data centers and different hyperscale machine users are looking to integrate much economical choices.

• Broadcom's ASICs are fueling accelerated growth, and the banal is attractively priced.

• 10 stocks we similar amended than Broadcom ›

The wide adoption of ChatGPT successful aboriginal 2023 heralded the question of generative artificial quality (AI) to come. These next-generation AI models were importantly much utile than their predecessors but required a large woody much computational horsepower. Data centers and unreality providers -- wherever astir AI resides -- scrambled to get the champion AI chips wealth could buy.

This fueled a maturation spurt for Nvidia. Its graphics processing units (GPUs), primitively designed to make lifelike images successful video games, proved arsenic adept astatine moving information done the ether astatine lightning speeds.

However, priorities person begun to shift, opening the doorway for alternate solutions. While Nvidia volition apt proceed to predominate the information halfway GPU space, the existent absorption connected energy-efficient alternatives suggests that Broadcom (NASDAQ: AVGO) represents a 2nd accidental for AI investors.

GPUs, portion powerful, devour a large woody of energy. Large-scale AI users are progressively focusing connected much economical ways to powerfulness AI. That's wherever Broadcom comes in. The company's application-specific integrated circuits (ASICs) tin beryllium customized to beryllium overmuch much businesslike for circumstantial computing tasks, resulting successful vigor savings and little costs.

In the 4th quarter, Broadcom delivered grounds gross of $18 billion, up 28% twelvemonth implicit year, fueling adjusted net per stock (EPS) of $1.95, an summation of 37%. The results were driven by beardown request for its AI semiconductors, arsenic gross grew 74% twelvemonth implicit twelvemonth to $6.5 billion. That accelerating AI gross maturation is expected to continue, arsenic the institution is guiding for AI-centric income to soar 104% to $8.2 billion.

Even arsenic immoderate providers are seeing slowing AI growth, Broadcom's maturation and its backlog are accelerating. During the Q4 net call, CEO Hock Tan said, "We person ne'er seen bookings of the quality similar what we person seen implicit the past 3 months." The company's consolidated backlog grew 47% to a grounds $162 billion, up from $110 cardinal successful Q3. Broadcom expects to gain this arsenic gross implicit the adjacent 18 months, suggesting gross maturation volition vault higher. Moreover, Tan near nary uncertainty arsenic to the company's biggest maturation driver, saying, "We expect AI gross to proceed to accelerate and thrust astir of our growth."