Broadcom (AVGO) - Broadcom is a key supplier to Apple and has secured two hyper-scale data center customers, rumored to be Alphabet and Meta Platforms or similar companies like Amazon and Microsoft [1] - The company is considered the second-largest AI semiconductor supplier, making its growth narrative very appealing [11] Nvidia (NVDA) - Nvidia is the largest AI chipmaker, with its Blackwell series AI chips being the highest-performing on the market despite some overheating challenges [3] - Nvidia's H100 and H200 series chips have driven significant growth, with total sales projected at $129.02 billion in fiscal 2025, a 1000% increase from 2020 sales of $10.91 billion [15] - Nvidia's price performance has more than doubled its top-line growth, with FY26 sales projected to increase by 48% to $191.84 billion [9] - YTD performance: +176% [5] Taiwan Semiconductor (TSM) - Taiwan Semiconductor is the world's largest provider of integrated circuit foundries and a key supplier for Apple [14] - The company provides foundries for other companies to produce AI chips, including Nvidia [14] - Taiwan Semiconductor has the cheapest P/E valuation on the list at 29.2X forward earnings and is expected to post double-digit top and bottom-line growth this year and in FY25 [17] - YTD performance: +116% [8] Industry Overview - The global market for artificial intelligence is presumed to be worth trillions in the coming years, making semiconductor stocks like Broadcom, Nvidia, and Taiwan Semiconductor lucrative investments going into 2025 [7] - Semiconductor stocks are particularly targeted due to their role in configuring artificial intelligence [18] - YTD performance of Nvidia: +94% [4]

NVIDIA - NVIDIA is the dominant player in AI infrastructure and GPUs, with no significant competition yet [1] - The company's GPUs are in high demand for accelerating AI workloads, a trend expected to continue [1] - NVIDIA has a P/E ratio of 53.92 and a projected earnings growth of 40.29% [1][16] - The stock has a 19.8% upside potential and a dividend yield of 0.03% [2][15] - NVIDIA's MarketRank™ is in the 98th percentile, indicating strong market performance [2] Broadcom - Broadcom is NVIDIA's main competitor in AI computing, focusing on ASICs for specific customers [5][17] - The company's Q3 revenue grew by 51%, with AI-driven revenues surging 220% [6] - Broadcom has a P/E ratio of 210.03 and a dividend yield of 0.98% [17] - The stock has a projected earnings growth of 35.88% and a MarketRank™ in the 94th percentile [6][17] - Broadcom acquired three new hyperscaler customers, potentially adding tens of billions in future revenue [6] TSMC - TSMC manufactures approximately 90% of the world's most advanced semiconductors [23] - The company is building facilities in the US to mitigate geopolitical risks, including a potential collaboration with NVIDIA for AI chips [25] - TSMC has a P/E ratio of 32.31 and a dividend yield of 1.09% [9][23] - The stock has a 6.1% upside potential and a projected earnings growth of 27.34% [10][23] - TSMC's MarketRank™ is in the 73rd percentile, with a moderate buy rating from analysts [10] Industry Trends - The AI arms race in big tech is driving demand for advanced semiconductors, benefiting companies like NVIDIA, Broadcom, and TSMC [14] - In 2024, chip stocks returned 182%, 123%, and 97%, reflecting strong market performance [14] - The AI revolution is expected to create real-world impacts by 2025, further boosting demand for advanced chips [3][14]

Core Insights - Stock splits are indicative of a company's health and can signal positive future performance, as companies that split their stock tend to outperform the market over time [1][9] - Employees benefit from stock splits as they make shares more affordable, allowing for easier participation in ownership without straining personal finances [2][9] Broadcom - Broadcom is considering a stock split in 2024, having increased over 400% in the last two years and 30% since the last earnings report, with potential for further growth [3] - The stock is currently trading at $239.68 with a price target of $221.88, and analysts expect it to reach above $500 due to AI-driven growth and strong cash flow [3][10] - Revenue growth is projected near 15% for 2025, driven by custom AI accelerators and the acquisition of VMWare, which is expected to enhance growth significantly [10] Casey's General Stores - Casey's General Stores has maintained a self-funded growth model, allowing for dividends and share buybacks while expanding its convenience store operations [4] - The stock is trading at $403.67, with a price target of $424.00, and is likely to undergo a stock split as it continues to trend higher [4] - The recent acquisition of Fikes is expected to bolster its market presence in the Southwest, contributing to sustained share price growth [4] Costco - Costco's stock is trading at nearly $1000, making it a prime candidate for a stock split due to its high share price [12] - The company is expected to continue its growth trajectory, supported by robust cash flow and a healthy balance sheet, with potential special dividends anticipated by late 2025 or early 2026 [12] - Costco's strong market position and cash build-up are critical for reinvestment and capital returns, further solidifying its financial health [12]

Company Overview - Nvidia is a leader in graphics processing units (GPUs) with over 80% market share in AI accelerators, known for accelerating complex workloads like machine learning and AI applications [2] - Broadcom operates in the semiconductor and infrastructure software sectors, with significant market shares of 80% in networking chips and 60% in custom AI chips [14] Financial Performance - Nvidia reported a 94% increase in revenue to $35 billion for Q3 fiscal 2025, driven by 112% growth in data center sales and 72% growth in automotive and robotics sales, with non-GAAP earnings more than doubling to $0.81 per diluted share [3] - Broadcom's revenue increased by 51% to $14 billion in Q4 fiscal 2024, with non-GAAP earnings rising 28% to $1.42 per diluted share [5] Market Trends - Nvidia's stock has surged 895% since the launch of ChatGPT in November 2022, with 92% of analysts rating it a buy and a median target price of $175 per share, indicating a 30% upside from the current price of $134 [6] - Wall Street anticipates Broadcom's adjusted earnings to grow by 30% in the next four quarters, making its current valuation of 46 times adjusted earnings appear reasonable [11] Strategic Moves - Stanley Druckenmiller sold his entire stake in Nvidia in Q3 and initiated a new position in Broadcom, which raises questions about his insights into market trends [1][4] - Broadcom's acquisition of VMware contributed 40 percentage points to revenue growth, indicating a strategic move to enhance its market position [10] Future Outlook - Nvidia's adjusted earnings are expected to increase by 50% in the next four quarters, suggesting that its current valuation of 52 times adjusted earnings is relatively cheap [13] - Broadcom anticipates a fivefold increase in AI chip sales to major customers over the next three years, with potential new customers including Apple and OpenAI, indicating strong future growth prospects [15]

Core Viewpoint - The article emphasizes the importance of investing in stocks with a strong history of dividend growth, particularly in the context of market volatility and economic uncertainty. These stocks are seen as a hedge against risks and provide consistent returns to investors. Group 1: Dividend Growth Stocks - Stocks highlighted in the article have a strong history of dividend growth, indicating they are mature companies less susceptible to market swings [2] - These stocks provide downside protection and act as a hedge against economic and political uncertainty [2][10] - The article identifies four specific stocks from diverse sectors that exemplify these characteristics [3] Group 2: Company-Specific Insights - **Nike**: The company focuses on sports and storytelling to enhance brand distinction, with a long-term earnings growth expectation of 15% and an earnings surprise of 29.8% over the past four quarters. Nike recently announced an 8% year-over-year increase in its quarterly dividend to 37 cents per share, marking its 23rd consecutive year of dividend increases [5][6][18] - **Broadcom**: The company generates significant cash flow, allowing for consistent dividends. It increased its quarterly dividend by 11% year-over-year to 59 cents per share and spent $12.4 billion on share repurchases and $9.8 billion on dividends in fiscal 2024 [7][15] - **Motorola**: The company is positioned for growth in the communications equipment sector, with a recent 11% year-over-year increase in its quarterly dividend to $1.09 per share. Motorola has a long-term earnings growth expectation of 10.1% and has gained 51.6% over the past year [8][9][17] - **Realty Income**: This retail REIT has a compound annual dividend growth of 4.2% since 1994 and a long-term earnings growth expectation of 6.4%. The company focuses on acquiring and managing commercial properties with reliable rental revenues [12][16] Group 3: Market Context - The U.S. equity markets have experienced significant growth, driven by solid economic conditions, a healthy labor market, and an accommodative Federal Reserve stance. This environment has been conducive to stock market momentum [13] - Amid ongoing market volatility, focusing on stocks with a history of dividend hikes and healthy yields is recommended for risk-averse investors [14]

Stock Split Stocks and Billionaire Interest - Billionaires are heavily investing in two prominent stock-split stocks as 2025 approaches [1] - Stock splits adjust share prices and outstanding share counts without affecting market cap or operating performance [3] - Forward stock splits are favored by investors as they make shares more affordable for retail investors [9] - Companies completing forward splits tend to out-innovate competitors, often reflected in rising share prices [18] Broadcom (AVGO) - Broadcom is a leading company in AI-networking solutions and completed a 10-for-1 stock split in mid-July [6] - In fiscal 2024, Broadcom generated $12.2 billion in AI sales, with CEO Hock Tan forecasting $60 billion to $90 billion in AI chip spending by its top hyperscale customers over the next three years [7] - Broadcom's AI-networking solutions, including the Jericho3-AI fabric, are preferred by businesses for connecting up to 32,000 GPUs to maximize computing capabilities and minimize latency [11] - Beyond AI, Broadcom generates significant revenue from wireless chips for next-gen smartphones, cybersecurity solutions, and industrial optical components and sensors [15] - Billionaire Philippe Laffont of Coatue Management purchased 1,488,666 shares of Broadcom in Q3 2024, while Stanley Druckenmiller opened a new position of 239,980 shares [14] Super Micro Computer (SMCI) - Super Micro Computer, a customizable rack server and storage-solutions company, completed a 10-for-1 stock split at the end of September [16] - The company reported $15 billion in net sales for fiscal 2024, representing 110% growth from the previous year, with Wall Street forecasting sales to double to $30 billion by fiscal 2026 [4] - Super Micro's customizable rack servers incorporate Nvidia's GPUs, enhancing demand for its products [8] - Philippe Laffont of Coatue Management purchased 241,610 shares of Super Micro in Q3 2024, aligning with his focus on cutting-edge growth stocks [23] - However, the company faces scrutiny due to allegations of accounting manipulation and sanctions evasion, leading to delays in filing its fiscal 2024 annual report and the resignation of its accounting firm [21][17] AI and Market Performance - AI has been the top catalyst for Wall Street's outperformance in 2024, with investor enthusiasm for stock-split stocks playing a significant role [5] - Two of Wall Street's hottest AI stocks, Broadcom and Super Micro Computer, are on the buy lists of top money managers [13] - If an AI bubble were to burst, Broadcom is better positioned than direct players like Nvidia to handle the fallout [25] Market Overview - As of Dec 19, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite gained 12%, 23%, and 29% year-to-date, respectively [22]

Core Insights - The year 2024 has been exceptionally favorable for AI stocks, with many companies experiencing significant gains [1] Company Performance - Broadcom's share price has nearly doubled year to date, although it faced a recent sell-off due to the Fed's cautious stance on rate cuts for 2025 [2] - Wall Street analysts remain overwhelmingly bullish on Broadcom, with 38 out of 43 analysts rating it as a buy or strong buy [3] - Nvidia's stock has seen remarkable growth, soaring nearly 239% in 2023 and over 160% year to date in 2024, despite recent corrections [4] - A significant majority of analysts, 62 out of 64, rate Nvidia as a buy or strong buy, with an average 12-month price target nearly 32% above its current share price [5] Market Opportunities - Broadcom is expected to benefit from the development of custom AI accelerators by large organizations, with management estimating a market potential of $60 billion to $90 billion by fiscal 2027 [7] - Nvidia's upcoming Blackwell chips are anticipated to drive sustained revenue and earnings growth, with demand for these GPUs described as "staggering" by CEO Jensen Huang [6][9] Financial Performance - Broadcom's recent quarterly results have not been outstanding when excluding the impact of its VMware acquisition, yet investor excitement remains high due to AI opportunities [12] - Nvidia's revenue surged by 94% year over year in Q3 to a record $35.1 billion, primarily driven by the demand for data center GPUs related to AI [14] Future Outlook - Analysts express mixed sentiments about the sustainability of the current momentum in AI stocks, with some expecting continued growth for Broadcom and Nvidia into 2025 [11] - Nvidia is viewed as the more favorable AI stock for 2025, with expectations of a potential 30% increase in share price over the next 12 months [10][16]

Core Viewpoint - The article discusses the strong performance and growth potential of Broadcom in the AI chip market, positioning it as a viable alternative to Nvidia, which has seen significant stock appreciation but is now considered expensive. Company Performance - Broadcom's organic revenue growth, excluding VMware acquisition revenue, was 9% [3] - The company expects $14.6 billion in revenue for Q1 fiscal 2025, a 22% increase year-over-year [3] - Broadcom's revenue for the current fiscal year is projected to rise by 19% from $51.5 billion [8] - The company reported a 51% year-over-year revenue increase to $14 billion for Q4 fiscal 2024 [10] AI Revenue Growth - Broadcom forecasts a 65% year-over-year increase in AI-related revenue to $3.8 billion, making up 26% of total revenue [4] - AI-related revenue for fiscal 2024 was $12.2 billion, up from $3.8 billion the previous year [17] - The addressable market for custom AI and networking chips is estimated to be between $60 billion and $90 billion by fiscal 2027 [18] Market Position - Broadcom controls 55% to 60% of the custom chip market, indicating a strong competitive position [7] - The company is expected to maintain healthy double-digit growth rates over the next few fiscal years [12] Valuation Metrics - Broadcom has a price/earnings-to-growth (PEG) ratio of 0.72, which is lower than Nvidia's PEG ratio of 0.82 [20]

Financial Performance - Total net revenue for the fiscal year ended November 3, 2024, was $51.574 billion, compared to $35.819 billion in the previous year[115] - Net income for the fiscal year ended November 3, 2024, was $5.895 billion, down from $14.082 billion in the previous year[115] - Comprehensive income for the fiscal year ended November 3, 2024, was $5.895 billion, compared to $14.343 billion the previous year[118] - Net income for the fiscal year ending October 29, 2023, was $5.895 billion[127] - Net income attributable to common stock for fiscal year 2024 was $5.895 billion, compared to $14.082 billion in fiscal year 2023[193] - Diluted net income per share for fiscal year 2024 was $1.23, down from $3.30 in fiscal year 2023[193] Tax and Financial Liabilities - The company's effective tax rate and cash tax costs are expected to increase due to U.S. tax reforms and global minimum tax implementations, with Singapore's adoption effective for fiscal year 2026[316] - Tax incentives and holidays decreased the provision for income taxes by approximately $2.261 billion and increased diluted net income per share by $0.47 for fiscal year 2024[316] - The company is subject to tax audits in various jurisdictions, including those related to the VMware Merger and Dell's consolidated group, which could materially affect tax provisions and accruals[316] - Potential tax liabilities from VMware's spin-off from Dell in November 2021 could have a material adverse effect on the company's financial condition and operating results if deemed not tax-free[316] - The company's tax incentives and holiday arrangements are subject to compliance conditions, and any changes or terminations could significantly increase corporate income taxes[316] Intellectual Property and Legal Risks - The company relies on a combination of IP rights including patents, copyrights, trademarks, and trade secrets to protect its intellectual property[312] - The company may be subject to warranty claims, product recalls, and product liability, which could significantly impact its financial condition and results of operations[313] Market Competition and Gross Margins - The company faces intense competition in its industries, which could hinder revenue growth due to rapid technological changes, aggressive pricing, and new delivery methods[310] - Competitors with greater resources, longer operating histories, and stronger market positions could adversely impact the company's market share and gross margins[310] - Gross margin is highly dependent on product mix, price erosion, and capacity utilization, with shifts in sales mix potentially leading to lower margins[310] Stock and Equity Information - As of November 29, 2024, the company had 4,687,356,156 shares of common stock outstanding[333] - The aggregate market value of voting and non-voting common equity held by non-affiliates was approximately $583.1 billion as of May 3, 2024[333] - The company completed a ten-for-one forward stock split of its common stock on July 12, 2024, retroactively adjusting all share, equity award, and per share amounts in the financial statements[131] Debt and Interest Rate Sensitivity - The company had $56.3 billion in principal amount of fixed rate senior notes outstanding as of November 3, 2024, with an estimated fair value of $51.4 billion[86] - A hypothetical 50 basis point change in market interest rates would alter the fair value of fixed rate senior notes by approximately $1.7 billion as of November 3, 2024[86] - The company had $13.6 billion of outstanding 2023 Term Loans as of November 3, 2024, with a hypothetical 100 basis point change in interest rates impacting interest expense by approximately $137 million[86] Foreign Exchange and Hedging - The company uses foreign exchange forward contracts to hedge currency exchange rate risks, with a hypothetical 10% change in rates not materially impacting financial statements[84] Financial Statements and Audits - The company's consolidated financial statements for the period ended November 3, 2024, were audited and found to present fairly in all material respects[92] Cash Flow and Liquidity - Cash and cash equivalents decreased to $9.348 billion as of November 3, 2024, from $14.189 billion the previous year[111] - Net cash provided by operating activities for fiscal year 2024 was $19.962 billion, compared to $18.085 billion in fiscal year 2023 and $16.736 billion in fiscal year 2022[122] - Cash and cash equivalents at the end of fiscal year 2024 were $9.348 billion, down from $14.189 billion at the end of fiscal year 2023 and $12.416 billion at the end of fiscal year 2022[122] - Cash paid for interest in fiscal year 2024 was $3.25 billion, compared to $1.503 billion in fiscal year 2023 and $1.386 billion in fiscal year 2022[122] - Cash paid for income taxes in fiscal year 2024 was $3.155 billion, up from $1.782 billion in fiscal year 2023 and $908 million in fiscal year 2022[122] Acquisitions and Mergers - Broadcom completed the acquisition of VMware on November 22, 2023, for $30.788 billion in cash and 544 million shares of Broadcom common stock valued at $53.398 billion[130] - Acquisitions of businesses, net of cash acquired, amounted to $25.978 billion in fiscal year 2024, a significant increase from $53 million in fiscal year 2023 and $246 million in fiscal year 2022[122] - Total assets acquired in the VMware Merger amounted to $110,922 million, with goodwill accounting for $54,206 million[160] - The fair value of net assets acquired in the VMware Merger was $79,648 million[160] - VMware contributed $12,384 million in net revenue for fiscal year 2024[160] - The EUC business was sold for $3.5 billion in fiscal year 2024[160] - Total identified intangible assets from the VMware Merger were valued at $45,572 million, with developed technology accounting for $24,156 million[162] - IPR&D from the VMware Merger was valued at $4,730 million, with VMware cloud foundation releases accounting for $790 million, $2,900 million, and $750 million respectively[164] - The acquisition of Seagate's SoC operations was completed for $600 million in April 2024[166] Research and Development - Research and development expenses increased to $9.310 billion for the fiscal year ended November 3, 2024, from $5.253 billion the previous year[115] Assets and Liabilities - Goodwill increased significantly to $97.873 billion as of November 3, 2024, from $43.653 billion the previous year[111] - Long-term debt rose to $66.295 billion as of November 3, 2024, compared to $37.621 billion the previous year[111] - Total assets grew to $165.645 billion as of November 3, 2024, from $72.861 billion the previous year[111] - Total stockholders' equity as of November 3, 2024, was $67.678 billion[127] - Goodwill balance as of November 3, 2024, increased to $97.873 billion, primarily due to the acquisition of VMware for $54.206 billion[189] - Intangible assets as of November 3, 2024, totaled $55.879 billion, with a net book value of $40.583 billion[191] Revenue Streams - Subscriptions and services revenue increased to $21.215 billion for the fiscal year ended November 3, 2024, from $7.928 billion the previous year[115] - Pro forma net revenue grew to $52,188 million in 2024 from $48,227 million in 2023[165] Amortization and Depreciation - Amortization of acquisition-related intangible assets rose to $6.023 billion for the fiscal year ended November 3, 2024, from $1.853 billion the previous year[115] - Expected amortization expense for fiscal year 2025 is $8.055 billion, with a total of $38.243 billion expected over the next five years and thereafter[191] - Depreciation expense rose to $593 million in 2024 from $502 million in 2023[179] Stock-Based Compensation and Dividends - Stock-based compensation for the fiscal year ending October 29, 2023, amounted to $5.747 billion[127] - Dividends to common stockholders for the fiscal year ending October 29, 2023, totaled $7.005 billion[127] - Repurchases of common stock for the fiscal year ending October 29, 2023, amounted to $7.176 billion[127] - Payments of dividends in fiscal year 2024 totaled $9.814 billion, up from $7.645 billion in fiscal year 2023 and $7.032 billion in fiscal year 2022[122] - Repurchases of common stock under the repurchase program amounted to $7.176 billion in fiscal year 2024, compared to $5.824 billion in fiscal year 2023 and $7 billion in fiscal year 2022[122] Inventory and Receivables - Total inventory as of November 2024 was $1,760 million, down from $1,898 million in October 2023[170] - Total trade accounts receivable sold under factoring arrangements were $5,900 million in fiscal year 2024[176] Discontinued Operations - Discontinued operations from the EUC business resulted in a net loss of $273 million in fiscal year 2024[184] Leases and Contractual Obligations - Cash paid for operating leases increased to $223 million in 2024 from $90 million in 2023[186] - ROU assets obtained in exchange for operating lease liabilities surged to $1,165 million in 2024 from $28 million in 2023[186] - Weighted-average remaining lease term for operating leases extended to 11 years in 2024 from 10 years in 2023[186] - ROU assets for operating leases rose to $1,325 million in 2024 from $463 million in 2023[188] - Total undiscounted liabilities for operating leases stood at $1,795 million in 2024[188] - Contract assets increased significantly to $4,402 million in 2024 from $955 million in 2023[154] - Contract liabilities jumped to $14,495 million in 2024 from $2,786 million in 2023[154] Property, Plant, and Equipment - Total property, plant, and equipment net value increased to $2,521 million in 2024 from $2,154 million in 2023[171] Pension Plans - Expected benefit payments for fiscal year 2025 are $99 million, with a total of $440 million expected from 2030 to 2034[200] - The U.S. qualified pension plan assets were 100% allocated to fixed income for both fiscal years 2024 and 2023[200]

Broadcom is becoming a popular AI stock as it helps big tech develop its own artificial intelligence semiconductor solutions.In today's video, I discuss Broadcom (AVGO -2.37%), its business strategy, growth opportunities, potential risks, and why artificial intelligence stock investors should not ignore this semiconductor stock.*Stock prices used were the market prices of December 19, 2024. The video was published on December 20, 2024. ...