Billionaire Stanley Druckenmiller of Duquesne Family Office outperformed the S&P500 (SNPINDEX: ^GSPC) fallen by 50 percentage points over the past three years. He bought 239,980 shares of Broadcom (NASDAQ:AVGO) during the third quarter, and it is now among its top 15 holdings.
Billionaire Steven Cohen of Point72 Asset Management outperformed the S&P 500 by 30 percentage points over the past three years. He bought 211,823 shares of Arista Networks (NYSE: ANET) in the third quarter, and it is now among its top 10 positions.
Importantly, Broadcom and Arista are major providers of artificial intelligence (AI) infrastructure, and have seen their stock prices more or less quadruple over the past two years. Both companies completed a stock split in 2024 to reset their rising stock prices.
Here’s what investors need to know about these artificial intelligence stocks.
Broadcom is a semiconductor and software company best known for its networking chips and application-specific integrated circuits (ASICs). It has an 80% revenue share in Ethernet switching and routing (network) chipsets, which move information through data centers. That market could grow by as much as 30% annually as companies build out artificial intelligence (AI) infrastructure JPMorgan Chase.
Meanwhile, Broadcom has about a 60% market share in high-end ASICs, which are custom chips built specifically for specialized use cases, particularly to accelerate artificial intelligence workloads. Broadcom is currently designing chips for three hyperscalers, a term that refers to companies with huge data center footprints. Although these hyperscalers are unnamed, most analysts suspect they are Google’s parent company AlphabetTikTok parent ByteDance and Metaplatforms.
Importantly, Broadcom CEO Hock Tan recently said that revenue from these three hyperscalers could be between $60 billion and $90 billion in 2027, up from $12.2 billion in 2024. That implies annual growth of between 70% and 95% %. But Tan also said Broadcom was working on two new hyperscalers – reportedly Apple and OpenAI – which could be revenue-generating customers by 2027. That means sales of AI chips could increase at a triple-digit pace over the next three years.
Wall Street expects Broadcom’s adjusted profits to rise 22% annually through 2027. That consensus makes the current valuation of 47 times adjusted earnings seem reasonable, but also leaves room for upside if Broadcom exceeds its expectations for sales of custom AI chips. Therefore, patient investors should consider buying a few shares of this stock today.
Arista is a networking company best known for supplying Ethernet switches to hyperscalers Microsoft and Meta Platforms, although it also has other high-profile clients such as Alphabet, Oracleand SpaceX. The company is the market leader in high-speed Ethernet switches, which means 100 gigabits per second and faster. High-speed networks are essential for AI workloads.
That’s important Cisco systems is still the leader in Ethernet switching, but Arista has three times the market share in the high-speed category. That dominance is partly due to the Extensible Operating System (EOS). All Arista hardware runs on one version of EOS, but Cisco uses multiple operating systems, which can make managing the network more complicated.
Looking ahead, Arista says the total addressable market will grow 14% annually through 2028. Artificial intelligence will undoubtedly be a major growth driver. Hyperscalers are investing heavily in artificial intelligence infrastructure to ensure they remain competitive. However, Arista should also benefit as smaller enterprises modernize their networks to support an increasing number of connected devices.
Wall Street expects Arista’s adjusted earnings to rise 17% annually through 2027. That makes the current valuation of 53 times adjusted earnings expensive. But I think analysts are underestimating future profits. Arista has exceeded consensus expectations over the last fifteen quarters and reported earnings have averaged 14% above expectations over the last six quarters. Patient investors should consider buying a small position today.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Trevor Jennevine holds positions at Arista Networks. The Motley Fool holds positions in and recommends Alphabet, Apple, Arista Networks, Cisco Systems, JPMorgan Chase, Meta Platforms, Microsoft, and Oracle. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
2 Stock-Split Artificial Intelligence (AI) Stocks Wall Street Billionaires Are Buying was originally published by The Motley Fool
