Know-how has arguably been Wall Road’s hottest sector in 2024. Speedy progress in rising industries, akin to synthetic intelligence (AI), has fueled an enormous rally, making this yr among the finest for expertise shares in latest reminiscence. Now, it is time to flip the web page to 2025.
However attempt to not overthink it; winners typically proceed to have success. Beneath is the pitch for why every ought to proceed delivering unbelievable returns in your portfolio.
Broadcom’s fiscal yr 2024 income totaled $51.5 billion, a 44% enhance over 2023. The corporate constructed its identify on semiconductors, however Broadcom has expanded into enterprise software program, together with infrastructure and safety. It acquired VMware for $69 billion late final yr, and the incremental income helped Broadcom develop its software program enterprise by 181% in 2024. The corporate’s income is now cut up roughly 60-40 between semiconductors and software program.
Semiconductor income exceeded $30 billion in 2024 however grew simply 7% from final yr. Nevertheless, synthetic intelligence has develop into an more and more thrilling progress alternative. Broadcom started working with outstanding AI developer OpenAI earlier this yr, and up to date stories point out that Broadcom is growing a devoted AI chip for Apple‘s information heart servers.
It units the desk for giant issues forward. These are early-stage alternatives for Broadcom, which grew its AI income by 220% in 2024 to $12.1 billion. The AI-driven hyper-growth Nvidia has loved appears to be starting to point out up in Broadcom’s enterprise. That bodes effectively for the inventory, which trades at 29 instances 2025 earnings estimates. It is a stable shopping for stage for a corporation that analysts estimate will compound earnings at a 20% progress charge over the long run.
Broadcom was a star in 2024, and its sturdy enterprise outcomes and growing AI alternatives may proceed rewarding buyers in 2025 and past.
Will Healy (Qualcomm): Qualcomm inventory doesn’t appear to be a profitable inventory at first look. It has struggled because the summer season as its 5G-driven progress runs its course. Furthermore, Apple plans to launch a competing smartphone chipset in 2027, seemingly ending its relationship with Qualcomm.
Such a transfer would most likely cut back the advantages it could expertise from an AI improve cycle. In fiscal 2024, its handset section, which homes the smartphone chipset enterprise, comprised 64% of firm revenues, that means the lack of Apple’s enterprise impacts its largest income supply.
Nevertheless, Qualcomm has lengthy ready for the day when its chipsets are much less in demand. To that finish, it has diversified into IoT and automotive, and its car-related section has skilled specific success. Though its general income grew by solely 9% in fiscal 2024 (ended Sept. 29), automotive income grew by 55%.
Moreover, Qualcomm launched PC chips earlier this yr. Its Snapdragon X Elite chips are sooner than Apple’s M2 chip in some respects. Additionally, assuming the rumors that it desires to amass some or all of Intel are true, its affect within the chip trade may develop if such a buyout happens.
Regardless of these considerations, the semiconductor inventory is up by 20% during the last yr, even after dropping greater than 30% from its June excessive. That decline has taken Qualcomm’s P/E ratio to 18, far beneath its chip trade rivals.
Admittedly, Qualcomm’s path is considerably unsure because it prepares for a probable lack of Apple’s enterprise and invests extra closely in new market niches. Nonetheless, because it builds on its progress in automotive, PCs, and different companies, buyers could need to purchase some Qualcomm shares whereas its earnings a number of remains to be low.
Jake Lerch (Meta Platforms): Meta has been a market-beating inventory for a while now. Since its debut as a public firm again in 2012, Meta’s shares have generated a compound annual progress charge (CAGR) of 24.8%. That is almost twice the return of the S&P 500, which has generated a CAGR of 15.2% over the identical interval. Extra to the purpose, Meta’s outperformance has been much more evident just lately. As of this writing, Meta inventory is up 75% year-to-date, versus a 28% year-to-date return for the S&P 500.
Nevertheless, it is not simply Meta’s observe document that ought to make it interesting to buyers as we head into 2025. What I really like concerning the inventory is its cash-generating energy.
Over the past 12 months, Meta generated $156 billion in income, making it the twenty second largest American firm by income (having simply handed House Depot earlier this yr). However what really catches my eye is how a lot free money stream Meta generates. Over the past 12 months, Meta has tallied greater than $52 billion in free money stream.
Merely put, Meta is a high-margin enterprise that has a river of money to return worth to shareholders in any variety of methods, together with repurchasing shares, paying down debt, making strategic acquisitions, and/or paying out dividends. Certainly, Meta introduced a $50 billion share buyback plan again in February, together with a first-ever quarterly dividend.
Traders who’re on the lookout for a market-beating inventory for the long run ought to contemplate Meta.
Before you purchase inventory in Broadcom, contemplate this:
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Randi Zuckerberg, a former director of market improvement and spokeswoman for Fb and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of administrators. Jake Lerch has positions in Nvidia. Justin Pope has no place in any of the shares talked about. Will Healy has positions in Intel and Qualcomm. The Motley Idiot has positions in and recommends Apple, House Depot, Intel, Meta Platforms, Nvidia, and Qualcomm. The Motley Idiot recommends Broadcom and recommends the next choices: quick February 2025 $27 calls on Intel. The Motley Idiot has a disclosure coverage.
3 Market-Beating Tech Shares to Supercharge Your Portfolio in 2025 and Past was initially revealed by The Motley Idiot
