Baron Fifth Avenue Growth Fund on Broadcom Inc.
Thesis
The Fund views Broadcom as another core beneficiary of sustained AI infrastructure demand and believes its valuation understates the strength of that opportunity. Semiconductor revenue increased 79% year over year while AI semiconductor revenue grew 143%. A new long-term agreement with Alphabet materially reduced concerns that Google could increasingly insource Broadcom's work. The Fund believes Broadcom's growth outlook is strong enough that the investment does not require multiple expansion to generate attractive returns.
“both companies' growth outlooks are so strong that we do not need multiple expansion”
Key risks
- Large hyperscaler customers could attempt to insource semiconductor design work.
- Competition could pressure the margins earned on AI semiconductor products.