Broadcom Inc. (AVGO): A Billionaire’s Bet on AI-Driven Growth

Broadcom Inc. (AVGO), a semiconductor and software giant, has emerged as a key holding in billionaire Cliff Asness’s portfolio—a signal that the stock could offer substantial upside potential. Asness, founder of AQR Capital Management, has positioned AVGO as a top pick for 2025, betting on its dominance in artificial intelligence (AI) infrastructure and its ability to weather market volatility. Here’s why investors should take notice.

Why Asness Loves Broadcom

Asness’s AQR Capital Management increased its stake in Broadcom to $660.47 million by Q4 2024, making it the sixth-largest holding in its portfolio. This move reflects confidence in AVGO’s AI-driven growth trajectory, which analysts project could unlock a $90 billion addressable market within two years. Broadcom’s AI revenue surged 77% year-over-year in early 2025 to $4.1 billion, fueled by partnerships with hyperscalers like Meta and Alphabet.

The AI Infrastructure Play

Broadcom’s strength lies in its diversified semiconductor and software solutions, including networking, optical interconnects, and custom AI chips. At the 2025 Optical Fiber Communications Conference, the company showcased advancements like its XPU-CPO (co-packaged optics) technology, which accelerates data transfer for AI clusters. These innovations are critical for data centers powering large language models and generative AI systems.

Analysts at UBS recently upgraded AVGO to a Buy, raising their price target to $270 (from $220) due to expectations of 20% AI revenue growth in FY2026 and 40% in FY2027. The firm also highlighted Broadcom’s $3 billion debt offering in early 2025, which strengthens its capacity to invest in AI R&D and acquisitions.

Financial Fortitude Amid Volatility

Despite a 18% year-to-date decline in early 2025—driven by broader tech sector turbulence—Broadcom’s fundamentals remain robust. Its Q4 2024 revenue hit $14.1 billion, with a 66% EBITDA margin. The company projects $14.6 billion in Q1 2025 revenue, implying an EPS of $1.51. While its trailing P/E of ~90 may seem high, a forward P/E of 29 (based on 2025 estimates) suggests undervaluation relative to its growth trajectory.

Risks and Challenges

No investment is without risks. Broadcom faces headwinds from U.S. tariff policies, which have pressured semiconductor stocks, and potential AI spending slowdowns. Additionally, its valuation multiples (P/S of 23.61) are high relative to peers, making it sensitive to macroeconomic downturns. Asness himself acknowledges that markets have grown less efficient over time, advising investors to prioritize long-term growth over short-term noise.

Analyst Sentiment and Institutional Backing

Over 160 hedge funds held AVGO as of Q4 2024, signaling broad institutional confidence. Analysts at BofA and Daiwa have emphasized Broadcom’s strong U.S. manufacturing capacity, $9.98 billion in cash reserves, and AI exposure as key resilience factors. Even as the Nasdaq dipped into bear territory in early 2025, Broadcom’s AI-focused innovations and partnerships with tech giants like Microsoft and Oracle provide a buffer against volatility.

Conclusion: A Strategic Long-Term Play

Broadcom’s inclusion in Asness’s top 10 picks underscores its role as a blue-chip AI stock with durable growth catalysts. With AI infrastructure spending expected to grow from $4.1 billion to $90 billion in two years, AVGO’s leadership in semiconductors and networking positions it to capture this upside. While short-term risks like tariffs and macroeconomic headwinds remain, the stock’s strong cash flows, 21% sales growth from its VMware acquisition, and analyst upgrades (e.g., UBS’s $270 target) justify its status as a long-term holding.

For investors willing to look past near-term volatility, Broadcom’s $1.17 trillion market cap, 10% annual dividend growth, and AI-driven innovation pipeline make it a compelling bet for the next wave of tech growth. As Asness’s strategy suggests, this is a stock built to endure—and thrive—in the AI era.