Once-obscure chipmaker Broadcom has enjoyed a record surge that has pushed its market capitalization inches behind Warren Buffett’s Berkshire Hathaway conglomerate and its portfolio of household names and economic household names. Palo Alto, California-based Broadcom is a semiconductor supplier to Apple and other major technology companies. Its devices can run the kinds of AI applications that have captivated investors over the past two years, and Broadcom also works with Alphabet’s Google, which partly designs its own AI chip called TPU. A strong earnings report last week sparked a rally in Broadcom, sending its June gains up more than 35%. When Broadcom hit an all-time high earlier this week, its market capitalization briefly overtook drugmaker Eli Lilly. As of Tuesday’s close, Broadcom had a market cap of $839 billion, just behind Eli Lilly’s $845 billion and Berkshire’s $882 billion. Omaha-based Berkshire is currently No. 7 in market value, behind a group of megacap tech giants. Berkshire Class A shares have gained 13% this year, underperforming the S&P 500. Many investors are excited about the prospect that the old-economy conglomerate — owner of BNSF Railway, Geico Insurance and Dairy Queen — could be next to will join the trillion-dollar club, which would make it the only non-tech company to do so in the U.S. (Overseas, PetroChina and Saudi Aramco are the only two companies with a market cap above $1 trillion.) But it could it will take longer for that to happen in this growth tech market with little exposure to AI beyond Apple’s large holdings. Big AI beneficiary Broadcom, meanwhile, is seeing strong demand from customers who need high-capacity chips that can power complex AI applications. Broadcom said $3.1 billion in sales during the current quarter can be attributed to revenue from AI products. “Speaking of AI accelerators, you can know that our high-scale customers are accelerating their investments to increase the performance of these clusters,” Broadcom CEO Hock Tan said on the recent earnings call. “And to that end, we’ve just acquired custom next-generation AI accelerators for these customers of ours at scale.” Bank of America, which reiterated a buy rating on the chipmaker, said Broadcom has a path to “joining the trillionaire club.” The Wall Street firm said Broadcom’s chips have diversified exposure to secular product cycles in a wide range of industries, including smartphones, cloud data centers, telecommunications and enterprise storage markets. Interactive Brokers chief strategist Steve Sosnick said Broadcom captures the momentum and should replace Tesla in the “Magnificent Seven.” Morgan Stanley last week resumed research coverage of Broadcom with an overweight rating, with the investment bank citing synergies from VMware’s acquisition of Broadcom, which closed in late 2023.
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