The world is changing rapidly. I agree with Marc Andreessen that AI Will Save The World, but large swaths are going to be disrupted. Meanwhile, the AI Doomerism fad has knocked down some stocks and given us a graceful entry point for one of the winners of the next ten years: Broadcom Inc. (AVGO), writes Michael Murphy, editor of New World Investor.
An awful lot of companies that seem like fortresses today are going to be the Eastman Kodaks, Xeroxes, and Blockbusters of tomorrow. That means the S&P 500 Index (^SPX) is likely to dramatically underperform over the next ten years. What seemed like the easiest way in the world to outperform – buy an S&P index fund – is going to become the world’s biggest value trap.
Broadcom Inc. (AVGO)
Meanwhile, Broadcom did something very unusual that put them on my radar. A few days after Nvidia Corp. (NVDA) provided guidance for 2027 that substantially topped forecasts, Broadcom took it one step further and guided for $30-per-share earnings in 2028. At the same time, they sharpened their previous 2027 revenue guidance from “well above $100 billion” to $115 billion and said 2028 “will double again.”
When I took a quick look, I found that in addition to providing AI inference processors to Google, their long-standing customer, they’ve added Anthropic, OpenAI, and Meta. Broadcom is becoming the AI industry’s main supplier of inference chips – Transaction Processing Units (TPUs).
It’s not the near-monopoly position Nvidia has in GPUs. In fact, Nvidia is a competitor. But it’s a powerful place to be. The recent decline in the stock from $495 to $347.30 gives us a graceful entry point.
Recommended Action: Buy AVGO.
