This Stock Was "Twice As Nice" as Nvidia — Here's What's Next

You’ve heard it hundreds of times since we launched Stock Picker’s Corner (SPC) … and you’ll keep hearing it going forward.

It’s a core mantra here:

When it comes to investors, you’re either a Wealth Builder or a Wealth Killer — and there’s no in-between. And Wealth Builders know: If you find the best storylines, you’ll find the best stocks.

You’ve heard ‘em all: The New Cold War … The Need for ‘Real Income’ and the Death of the American Dream … Biotech and the Race for the Next Blockbuster … the Long-Term Commodity Supply Shortfall … the Private-Equity Tidal Wave … Sports as an Asset Class … the Deadly Gambling and Speculative Trading Boom … the Birth of the Space Economy and the Artificial Intelligence (AI) Era.

Back in mid-July 2024 — so just a few months after we launched SPC — I revisited several of those storylines … and shared a carefully curated “short list” of “Best Stock” beneficiaries …

One of the “Best Stocks” we brought you was CBOE Global Markets Inc. (CBOE), the financial exchange that directly benefits from trading traffic (and that also “owns” the VIX, otherwise known as the “Fear Gauge”). We said that CBOE would be one of the biggest beneficiaries of the Wealth Killer Trading Boom — a way to own the casino while all the gamblers crapped out at the gaming tables. As I showed you last week, CBOE has more than doubled your money (108%) since our recommendation.

As part of that story last week, I promised I would circle back and tell you about another win we’ve delivered.

I’m keeping that promise.

You see, in that same July 16, 2024 research report, we doubled-down on the AI Era. But when it came to the “best stock beneficiaries,” we had a choice to make: We could follow “The Crowd” — buy the stock everyone else was yakking about — and recommend Nvidia (NVDA). But I took the “Road Less Travelled” — and recommended rival Broadcom (AVGO). And “it made all the difference.”

Since that summer 2024 story, Nvidia shares have surged from $127 to $219.50 — a gain of 73% … a nifty return.

Broadcom, however, zoomed from $166 to $415 — a gain of 149%.

So by doing our own “due diligence" — by doing our own thinking and having the courage of our conviction — we pulled down double the gain of the “Nvidia Gang.”

They’re both great companies … and are both great chipmakers. But, as Wealth Builders, we understand that the stock market is a “what-comes-next” organism. So we turned our attention forward — and looked at the “what-comes-next” for AI.

My Broadcom “Backstory”

I have a confession to make: I’ve followed both companies for more than a decade. I recommended Nvidia to my Private Briefing readers in June 2013 — at a split-adjusted price down around 35 cents a share. (That’s a 62,730% return for folks who are counting out there — enough to turn a $5,000 outlay into $3.14 million.)

The Broadcom path was much more interesting.

I recommended a company called LSI Corp., bought by Broadcom in 2014. I stuck with Broadcom — which was snapped up by Avago Corp. in early 2016 (keeping the Broadcom name). After scoping out the deal, I told my subscribers to stick with AVGO.

That gave me a head start here.

That’s why I knew that, while Nvidia was “the foundation” … the “brains” of AI — thanks to its chip expertise — Broadcom’s core competency was “the plumbing.”

This summary gives you the snapshot.

That All-Important “What Comes Next”

Both companies have the ammo to keep growing.

But let’s focus here on AVGO.

In reporting its first-quarter results, Broadcom said revenue grew 29% year-over-year to hit $19.3 billion. AI revenue came in at $8.4 billion — a year-over-year gain of 106%. Guidance — that all-important “look ahead” — said revenue will hit $22 billion, a scorcher year-over-year surge of 47%.

EBITDA margins are running at 68% — insanely high for a hardware venture.

But the “big story” here is that you’ve got two nice businesses under the single Broadcom roof — AI Chips plus Networking, which will lead to strong continued growth.

First up is semiconductors (which accounts for 60%-65% of Broadcom’s business).

• Custom AI chips.

• Wireless chips.

• Data-center networking (switches and other “pipeline” connections).

• And broadband and storage controllers.

Customers here include such heavyweights as Alphabet (GOOGL), Meta Platforms (META), Amazon Inc. (AMZN), OpenAI and Anthropic, to name a few. And networking is the “hidden goldmine,” since the essence of data centers is the massive data movement and since Broadcom dominates ethernet-switching chips.

Broadcom CEO Hock Tan recently said the company has a “line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027 … we have also secured the supply chain required to achieve this.”

Besides chips, other “differentiating” is infrastructure (the remaining 35%-40% of its business).

• Software unit VMware (the big one, acquired in late 2023 for about $69 billion).

• Enterprise virtualization (the cloud and on‑premise IT).

• Security software (Symantec).

• Mainframe and enterprise tools (CA Technologies).

What’s great here is that there’s lots of recurring subscription revenue — an annuity stream, which stock jockeys like me love to find. We also like high margins — and here we’re talking about margins as high as 70% to 80%.

And all this is a storyline that’s got a multiyear runway.

While the massive explosive growth may be in the rearview mirror, Nvidia and Broadcom can both still be really good stocks for long-term players going forward.

So here’s how Broadcom stacks up against Nvidia:

Drop me a note to let me know if you bought this … if you liked the research … and if there are other stocks you’d like us to dig into.

I’d like to hear from you.

See you next time;