AVGO, a holding he added to, is well positioned in custom AI accelerators and networking; revenue rose 86% with AI semis up 220% and record free cash flow. At 20 times trailing earnings, shares could rise over 60% next year if the multiple holds, though significant debt and an AI capex slowdown are risks.

But major cloud service providers are investing in custom chips, and companies like Broadcom are also benefiting from this shift.

Now, there is another company I want to discuss. Again, it's not a new company, but a company that already exists in my portfolio, and one to which I've recently added more.

But this next company is similar to Nvidia in one way or another, but it taps into a different part of the AI computing market. This is a part that is becoming increasingly important as major technology companies develop their own custom chips.

The third stock will be Broadcom, and the stock symbol is AVGO. This is one of my favorite companies that is well- positioned to benefit from the next phase of artificial intelligence.

Because I believe the AI computing market will become increasingly specialized , with some of the world’s largest technology companies investing heavily in custom chips designed for their specific workloads.

And there is a very good reason for that . When you spend billions of dollars on computing infrastructure, even relatively small improvements in efficiency can translate into huge financial benefits. This is where Broadcom comes in.

Broadcom really has two big opportunities within the artificial intelligence ecosystem. The first one we know of is artificial intelligence accelerators, and the second is high-speed networks.

Let's start with the custom chips. Instead of relying entirely on general-purpose processors, certain companies design specialized semiconductors for specific applications. Broadcom helps develop custom silicon chips for large clients.

Now, this does not necessarily mean that these customers will stop buying graphics processing units from Nvidia. I believe the market is large enough to support multiple computing architectures.

But custom chips could become an increasingly important part of the overall AI infrastructure market. Broadcom is well-positioned to take advantage of this.

The second opportunity is networks. Because as companies build larger AI computing clusters , they need to move huge amounts of data, and quickly. This requires advanced network technology.

Broadcom provides products that help connect these systems.

Again, this is not a business that talks about revenues and profits that may come in the future. They are already making billions today. They have requests to continue doing so at twice the pace over the next few years.

This growth was accompanied by the generation of large free cash flows.

It is true that Broadcom has significant debt, and this is something we need to monitor in the future. But generating cash in the company is an important part of my investment thesis.

Over the past year, Broadcom shares have fallen by about 5%. While the company just announced revenue growth of 86% last year. With AI semiconductor revenues growing by 220% and record free cash flow .

However, the valuation you are paying today is cheaper than it was a year ago. The stock is moving in one direction, which is stability, while the financial data continues to rise.

Sometimes it's hard to break free from the market's reaction, but when you really analyze the company for what it is, you can find great opportunities amid the fear.

Currently, Broadcom shares are trading at a price-to-earnings ratio of 20. This is from the perspective of the past twelve months. If the company stays at this multiple, the shares will rise by more than 60% next year.

In fact, I liked it so much that I increased my position in it, as you can see from this trading alert that I sent to my community last weekend. This is a name I've loved for a long time.

Of course, there will be fluctuations from the stock's point of view. But the business continues to grow. But what I often say to investors or students taking my course, and at this particular time, is that I know I am buying a high- quality company with a great valuation.

while Broadcom provides chips dedicated to artificial intelligence and networking technologies. Owning all three does not necessarily mean you are diversified, because all three companies have significant exposure to the same basic investment cycle in AI infrastructure.

If capital expenditures for artificial intelligence continue to grow, these companies will perform well. They will all benefit. But if spending slows down significantly, and that is the key word, the three companies could face some pressure.

Currently, there are three companies that are of particular interest to me: Vertiv, Nvidia , and Broadcom.