Broadcom: The $1.7tn AI underdog

Elite financials and management, at the center of the AI buildout leading to hypergrowth and world leading positions in ASICs and networking, this is a must own along with Nvidia in the Age of AI

Welcome to the 46th investment case and 20th AI & data center idea on Crack the Market (and the most comprehensive Broadcom investment case you will find online)! Join me as I dissect a compounding machine, a company with the very best financials, growth rates and cashflow generation in the world, with one of the best CEOs in the world, and at the center of the AI revolution thanks to its world leading ASIC (custom silicon) and networking products.

This article is part of my coverage of the generational AI capex supercycle supercycle. We are experiencing not only an accelerating but a truly parabolic surge in demand for AI infrastructure.

Below is one of my most important articles to date, to understand and invest in the generational AI capex supercycle (>$3-4tn over this decade).

As investors ask when hyperscaler capex will moderate, I believe that this historical AI infrastructure build will total in the trillions of dollars over the next few years, truly a once in a lifetime investment opportunity.

Find my top picks inside to play the megatrend!

The real winners will be the companies that build and power this new world, like Broadcom. I’ve already published deep dives into 20 of the top beneficiaries of the AI boom (all of which you can find on the “AI & Data Centers” tab on my newsletter), and there’s a lot more coming over the next weeks and months.

I also highly recommend reading/listening to my deep dive into Nvidia, the most important company in the world right now. Nvidia dominates the most critical technology trend in history, being at the center of the AI revolution which will drive growth and astronomical profitability for years to come.

I believe that Nvidia and Broadcom are highly complementary as companies to play this AI megatrend as GPUs and ASICs will coexist as the basis of the AI infrastructure:

Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.

Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.

You can already read my first 44 deep dives, all of which I see as winners in this new world of tariffs and deglobalization:

• ASML (reshoring & China idea): The most innovative company in the world will 2.5x its EPS by 2030.

• LKQ (resilience idea): The most defensive business in the auto industry is a tariff winner and could become a compounder.

• Atlas Copco (resilience, reshoring & China idea): The best industrials business in the world is on sale, extremely resilient and will benefit from US reshoring.

• Badger Meter (resilience idea): The perfect business in the perfect end market, water meters are the definition of resilience.

• Knorr Bremse (resilience idea): Who knew making brakes was this lucrative? Rerating with self help story and upside from German infra plan.

• Flex (reshoring idea): The electronics manufacturing giant building Nvidia’s servers and enabling reshoring is becoming a better business.

• Itron (resilience & reshoring idea): Riding the grid investment super cycle and enabling smart grids.

• Roper (resilience idea): A resilient cashflow compounder in the software space with inflecting growth.

• RELX (resilience idea): The company to own forever – one of the very best businesses on Earth.

• CPKC (resilience & reshoring idea): The rail connecting Canada/US/Mexico and benefiting from reshoring.

• Novo Nordisk (resilience idea): The most exciting pharma company in the world is misunderstood and its growth engine is ready to roar back to life.

• Kurita (resilience, reshoring & China idea): Water services expert with improving margins and benefiting from reshoring of semiconductor production.

• Halma (resilience idea): High quality compounder in safety, health and environmental technologies.

• Quanta Services (resilience & reshoring idea): Countercyclical compounder riding a multi decade infrastructure buildout.

• Infineon (China idea): Power semiconductor leader with strong structural drivers (AI power and China auto) amidst a cyclical recovery.

• Hubbell (resilience & reshoring idea): Pure play on US electrification demand driven by AI and grid investment cycle.

• Iberdrola (resilience & reshoring idea): Best integrated utility in the world with a stellar track record and solid growth driven by networks and renewables

• Nvidia (AI & data center idea): The backbone of the AI world is unstoppable.

• Veolia (resilience & reshoring idea): Resource management giant (water, waste, energy) due for a rerating.

• TJX (resilience idea): The retail giant that keeps winning.

• DSM-Firmenich (resilience idea): The diversified ingredient powerhouse benefiting from a transformational deal.

• Zoetis (resilience idea): Leader in animal healthcare.

• Prysmian (reshoring idea): Global cable leader entering a golden age.

• Bentley Systems (resilience & reshoring idea): The software compounder bringing infrastructure into the AI age.

• Givaudan (resilience idea): The highest quality and most resilient ingredient compounder has a compelling valuation.

• First Solar (reshoring idea): The rising Sun in a new electricity supercycle.

• Arcadis (resilience & reshoring idea): An engineering and design consultancy giant poised for a rerating.

• Thermo Fisher (resilience & reshoring idea): Life Science tools giant just had its clearing event and is a stealth reshoring winner.

• Nexans (reshoring idea): Electrification pure play with visibility into 2030.

• Croda (resilience idea): A covid darling with a ridiculous valuation is at an inflection point.

• Copart (resilience idea): One of the best businesses on Earth is being sold off, should you jump in?

• Schneider Electric (resilience & reshoring idea): The Electrification champion that keeps compounding.

• Cadence (resilience idea): A defensive compounder in the semi space & one of the most profitable software businesses in the world is getting better.

• SAP (resilience idea): The unstoppable growth engine behind every business.

• FICO (resilience idea): The Score Behind the Score.

• Siemens (resilience & reshoring idea): The best conglomerate on Earth is sitting on EUR70bn of optionality.

• MP Materials (resilience & reshoring idea): The Western rare earth champion.

• Sopra Steria (resilience & reshoring idea): This boring IT business is a hidden Defense and Sovereignty play.

• Hoffmann Green Cement (reshoring idea): Cementing a green future.

• Oracle (resilience idea): The Oracle of the AI Age.

• Dassault Systemes (resilience & reshoring): Why are investors overlooking this Software giant?

• Eli Lilly (resilience & reshoring): The best pharma company in the world.

• Air Liquide (resilience & reshoring): The ultimate defensive earnings compounder.

• CATL (China): The battery titan with electrifying growth.

After reading this article, you will understand why this company is so special thanks to incredible semiconductor franchises and a world beating software business leading to elite financial metrics, what it does, why it is currently the second biggest supplier of AI infrastructure with a rapidly scaling AI business driving one of the highest growth rates in tech, why its management team is second to none, why it is at an inflection point with the rapid adoption and scaling of ASIC clusters and why it remains one of the best businesses to own for the next decade.

In this article I go through:

1. Broadcom’s business and how it dominates many semiconductor franchises and importantly AI ASICs and networking as well its infrastructure software.

2. How this company is one of the very best compounders in the world, with elite financials, margins, cashflow generation, coupled with very rapid growth over the next few years.

3. What are ASICs and why we are entering an Age of ASICs and what is networking and why is it so important for AI data centers.

4. How we are entering an AI investment supercycle, what are the numbers and where is the capex going and why Broadcom is set to benefit, even ahead of what the market expects.

5. Why its CEO and management team have delivered one of the best financial and operational execution in the semiconductor space and are now incentivized to deliver incredible AI revenue growth.

Broadcom Investment Case