We spend a fair bit of time covering and commenting on the investment moves made by leading hedge fund managers, such as Ken Griffin at Citadel, to inform investors about what some of the experts in the field are seeing.
Market intelligence firm Data Insights tracks the stocks that hedge funds buy and sell. Specifically, it produces a monthly crowding report that examines the most popular long and short positions held by hedge funds and institutional investors.
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September was a rocky month for large caps, as the S&P 500 (SNPINDEX: ^GSPC) fell, partly due to the Federal Reserve’s decision to raise interest rates. But hedge fund managers saw this as a buying opportunity, particularly for large tech stocks.
Of the 10 stocks that hedge funds held the most in September, Amazon (NASDAQ: AMZN) was the most popular, followed by Microsoft (NASDAQ: MSFT) and Applied Materials (NASDAQ: AMAT). Nvidia (NASDAQ: NVDA), Meta Platforms (NASDAQ: META), and Broadcom (NASDAQ: AVGO) were also in the top 10.
One of the biggest movers in the group was AI chipmaker Broadcom, which flipped from bearish in August, when it was mostly shorted, to bullish in September, when it was among the most-held long stocks.
Why are hedge funds back on board with Broadcom? Should you be, too?
Long on Broadcom
Broadcom reported third-quarter earnings on Sept. 2 and posted impressive gains. Revenue jumped 86% year over year to $29.6 billion, beating estimates, while net income rose 216% to $13.1 billion or $2.68 per share. Its AI semiconductor revenue surged 221% year over year and 54% from the previous quarter to $16.7 billion. This also blew away estimates.
So what’s the problem?
Some analysts didn’t think the firm’s forward guidance was good enough. But let’s put this into perspective: Broadcom’s revenue growth is expected to increase 93% year over year to $34.8 billion in Q4. Those gaudy projections were just short of analysts’ estimates of $35.03 billion.
Further, the AI semiconductor revenue is expected to accelerate to $21.7 billion in Q4, up 236% year over year. Broadcom raised its AI semiconductor revenue guidance to $58 billion for fiscal 2026, up from $56 billion. That’s up from $20 billion the previous year.
In 2027, the firm is targeting $115 billion in AI semiconductor revenue, up 98% from this year. And it expects to double that to $230 billion in 2028.
