Predictive Analysis Indicates Potential Nasdaq Surge in 2025: One AI-Powered Stock Dividend Choice to Acquire Prior to New Year's Eve
Predictive Analysis Indicates Potential Nasdaq Surge in 2025: One AI-Powered Stock Dividend Choice to Acquire Prior to New Year's Eve
The Nasdaq Composite (^IXIC 1.77%) has progressed by 34% year to date, and historical data suggests that this momentum might continue into 2025. Since its establishment in 1971, the Nasdaq has delivered at least a 20% return in 20 years and at least a 30% return in 12 years. Following such performances, the index typically yields robust returns in the subsequent 12 months, as outlined below:
- After a year with a gain of more than 20%, the Nasdaq has an average return of 17% in the subsequent year.
- After a year with a gain of more than 30%, the Nasdaq has an average return of 19% in the subsequent year.
So, if the Nasdaq achieves a 30% return this year, history predicts that the index will add another 19% the following year, assuming its performance aligns with the average. It is important to note that past performance does not guarantee future results. Nonetheless, it might be beneficial to adhere to trends provided that the goal is long-term capital appreciation.
Moving on to Broadcom (AVGO 0.25%), the company carried out a 10-for-1 stock split in 2024 following substantial share price growth. Despite this, 85% of Wall Street analysts still recommend purchasing the stock.
Broadcom boasts a substantial market presence in networking chips and custom AI accelerators. The company's business can be broken down into two segments: semiconductor solutions and infrastructure software. Semiconductor revenue is generated by developing chips for Ethernet networking, server and storage connectivity, and mobile devices. Broadcom also manufactures custom AI chips for select clients. The software revenue comes from mainframe, cybersecurity, and virtualization products.
Broadcom's legacy businesses, such as mainframe software and non-AI semiconductors, are expected to grow at a modest pace. However, the company has a significant presence in several fast-growing industries. Broadcom is the leader in Ethernet switching and routing chips and custom AI chips. The company holds an 80% market share in data center networking chips and a 60% share in custom AI accelerators, according to analysts.
AI accelerator spending is projected to grow by 29% annually through the end of the decade, according to Grand View Research. This includes GPU sales from Nvidia, as well as custom AI chips from companies like Broadcom and Marvell. However, custom AI silicon sales are expected to outpace GPU sales during this period. This growth trend bodes well for Broadcom given its market dominance.
In the software sector, Forrester Research has recognized Broadcom subsidiary VMware as a leader in hyperconverged infrastructure (HCI), a technology that virtualizes data center compute, storage, and networking. HCI allows businesses to manage IT infrastructure more efficiently across on-premises data centers and hybrid clouds. The HCI market is projected to grow by 23% annually through 2030, according to Grand View Research.
Broadcom's fourth-quarter report renewed investor interest in the stock. The company reported a 51% increase in revenue to $14 billion for the fourth quarter of fiscal 2024, though the acquisition of VMware contributed 40% to this growth. Organic revenue increased by 11%. Non-GAAP net income also increased by 28% to $1.42 per diluted share.
Management's optimistic outlook following the report sent shares soaring. Broadcom currently provides custom AI chips for three hyperscale companies, reportedly Alphabet, Meta Platforms, and TikTok parent ByteDance. Management expects revenue from these customers to reach between $60 billion and $90 billion in fiscal 2027, which represents at least a fivefold increase in revenue from the current base of $12.2 billion in fiscal 2024.
CEO Hock Tan also hinted at two more hyperscale companies becoming Broadcom customers in the near future, and while he did not name them, several analysts suspect they are Apple and OpenAI. Any revenue from these customers would be in addition to the range previously provided, potentially leading to a significant increase in AI chip sales over the next three years.
Despite its current high valuation, Broadcom's shares are still considered a buy for patient investors comfortable with risk, as forward earnings estimates do not account for potential customers like Apple and OpenAI. Any upward earnings revisions are likely to drive share price appreciation.
Investors interested in long-term capital appreciation might find the potential growth in Broadcom's AI chip sales appealing, given its market dominance and the projected 29% annual growth rate through the end of the decade. Furthermore, strategically investing in companies like Broadcom that have historically delivered robust returns, such as the Nasdaq, could be a way to grow your wealth through investing in the finance sector.