Bristol Gate US Equity Strategy: NVDA's Demand Today is Broadcom's (AVGO) Opportunity Tomorrow

Bristol Gate Capital Partners, an investment management company, published its Q3 2025 investor letter for the “US Equity Strategy”. A copy of the letter can be downloaded here. The strategy underperformed the benchmark, the S&P 500® Total Return Index, this quarter, but still surpassed the index in dividend growth. The underperformance was due to a lack of significant exposure to the AI/TMT sector or the Value sector, which provides advantages stemming from the Federal Reserve's rate cut. The portfolio returned 15% dividend growth over the trailing 12 months, driven by the strong underlying fundamentals. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Bristol Gate US Equity Strategy highlighted stocks such as Broadcom Inc. (NASDAQ:AVGO). Broadcom Inc. (NASDAQ:AVGO) is a leading technology company that designs and develops various semiconductor and infrastructure software solutions. The one-month return of Broadcom Inc. (NASDAQ:AVGO) was -8.31%, and its shares gained 50.90% of their value over the last 52 weeks. On December 30, 2025, Broadcom Inc. (NASDAQ:AVGO) stock closed at $349.85 per share, with a market capitalization of $1.659 trillion.

Bristol Gate US Equity Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its third quarter 2025 investor letter:

"Broadcom Inc. (NASDAQ:AVGO) reported its third quarter results on September 4, which beat analyst expectations for both revenue and earnings per share. However, the highlight of the quarter was the addition of a fourth significant customer for its XPU (custom AI accelerator) products, who has placed over $10 billion in orders to be shipped in Q326. The combination of continued growth from the existing three customers and the addition of this fourth major customer will drive a material improvement in Broadcom's AI revenue growth in fiscal 2026 compared to the previous outlook. Management now expects 2026 AI revenue growth to exceed fiscal 2025's 50-60% rate. In addition to the four customers for which it has secured orders, the company is working on projects with three other hyperscalers. Our “NVDA’s demand today is AVGO’s opportunity tomorrow” thesis continues to play out in the hyperscaler market where demand for custom AI accelerators continues to grow as each of them journeys towards compute self-sufficiency. The company’s overall backlog now stands at $110B, with over 50% from semiconductors."

Broadcom Inc. (NASDAQ:AVGO) is in the 12th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 183 hedge fund portfolios held Broadcom Inc. (NASDAQ:AVGO) at the end of the third quarter, which was 156 in the previous quarter. In the fiscal third quarter of 2025, Broadcom Inc. (NASDAQ:AVGO) reported record revenue of $16 billion, up 22% year-over-year. While we acknowledge the potential of Broadcom Inc. (NASDAQ:AVGO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Broadcom Inc. (NASDAQ:AVGO) and shared the list of best AI stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.