We recently compiled a list of the 8 best FAANG stocks to buy, according to analysts. In this article, we’ll take a look at where Broadcom Inc. (NASDAQ:AVGO) should be a buy versus other FAANG stocks, according to analysts.
Big tech stocks have revealed plans to invest between $50 billion and $100 billion in GPU computing, indicating that artificial intelligence may be the biggest topic at the moment. On October 21st, Constellation Research Principal Analyst, Founder and Chairman Ray Wang appeared on CNBC’s “Squawk Box” to discuss the technology sector, specifically the Magnificent Seven and the role of artificial intelligence. shared the position of
Third quarter earnings season has arrived, but some of the Magazine 7 companies have yet to release their quarterly results. Wang suggests that artificial intelligence is just beginning to bear fruit and will continue to be a major theme for a long time to come. He added that companies, including the very largest, have poured hundreds of billions of dollars into AI in the first half of this year and plan to add more in the second half. He also shared that these mega-sized companies are also driving demand.
Related articles: Jim Cramer’s Game Plan: 23 stocks to watch for the rest of 2024 and 10 AI stocks to watch.
While these expenditures may seem to offer little return, historically investors have been concerned about companies investing in the Internet. However, Wang analyzes that the Internet is not the same as artificial intelligence. The Internet is fairly open and decentralized, and there have been many winners. AI, on the other hand, is more centralized, closed, and expensive, meaning that only a few players can make a mark.
Mr. Wang also shares that he owns all seven great stocks. An interesting mix highlighted by Wang is that most of the stocks in Mag7 are running digital ads across search, social media and commerce. In all three of these avenues, the following players will not be able to match the Magnificent Seven, especially in terms of revenue. On the regulatory front, he stressed that the sector needs some relaxation. He added that the tech sector needs to carry out mergers and that an IPO is currently scheduled, explaining why everything is on hold.
FAANG is an acronym that originally started as FANG and is comprised of five major technology companies. The term FANG was originally coined in 2013 by Jim Cramer, who said it belonged together with four tech stocks that operate on similar themes: digitization and the web. Today, FAANG is even broader and includes technology companies that are shaping the future, sometimes grouped into seven grand categories. With that said, let’s take a look at the eight best FAANG stocks to buy, according to analysts.
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our methodology
To find the 8 best FAANG stocks to buy, according to analysts, we researched the NYSE FANG+ index and selected the latest holdings. We then researched stocks and selected the ones with the highest analyst upside potential as of October 22, 2024. We also added hedge fund sentiment for each stock as of Q2 2024. The list is primarily ordered by analyst upside and hedge fund upside. Holders as of Q2 2024 are secondary.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
Is Broadcom Inc. (AVGO) the best FAANG stock to buy, according to analysts?
Engineer developing new integrated circuits with magnifying microscope.
Analyst upside as of October 22, 2024: 10.9%
Number of hedge fund holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company that designs, develops, and supplies semiconductor and infrastructure software products. Its products include cable modems, network processors, and storage adapters.
2024 was a very successful year for Broadcom Inc. (NASDAQ:AVGO). During the year, the company announced two breakthrough technologies, including the industry’s first switch platform for scalable AI systems and a retimer that makes it easier to manage large datasets for AI tasks. Continuing its aggressive strategy, Broadcom (NASDAQ:AVGO) on October 15 expanded its 20-year partnership with T-Systems, a subsidiary of Deutsche Telekom. This subsidiary is now a VMware Cloud Service Provider.
On June 13th, Nancy Tengler, CEO and Chief Investment Officer of Laffer Tengler Investments, appeared in an interview with Yahoo Finance and expressed her bullish stance on AVGO. Tengler says AVGO is like a poor man’s NVIDIA and is part of her 12 Best Ideas portfolio. She added that the company is in the sweet spot of the generative AI space, both in hardware and software components.
As Tengler notes, AVGO is certainly in the sweet spot for AI. Broadcom expects revenue from AI to increase 10% sequentially to $3.5 billion in the fourth quarter of fiscal 2024, bringing the full-year total to $12 billion. In addition to that, AVGO leverages artificial intelligence, so the cloud computing platform for enterprises promises solid growth opportunities.
ClearBridge Investments’ ClearBridge Large Cap Value Strategy says this about Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“In the IT space, we acquired Broadcom (NASDAQ: AVGO) because we believe we have a long path to growth in the custom silicon business. We believe the VMware acquisition will create new opportunities for stable and sustained growth in the low 20s, which is still in its infancy. We believe this stock has an attractive risk/reward profile given its reasonable outlook for mid-teens EPS growth, and the P/E ratio does not create an air pocket. “We gave Broadcom some breathing room by exiting Lam Research’s stock, believing it was pricing in a full recovery.”
Overall, AVGO ranks No. 4 among the eight best-buy FAANG stocks, according to analysts. While we see AVGO’s potential as an investment, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks with more promise than AVGO, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: BlackRock’s 8 Best Widemot Stocks to Buy Now and 30 Most Important AI Stocks.
Disclosure: None. This article was originally published on Insider Monkey.
