While investors have started looking beyond the chipmakers to play the AI boom, it’s clear that chips are still central to that theme. The world’s greatest AI software can’t run if there isn’t the infrastructure for it, including energy and data centers to the hardware, including processing chips.
It’s likely that many chipmakers will continue to benefit in 2025, and for now, the market will continue to reward the top industry players.
For instance, chipmaker Broadcom (AVGO) soared nearly 25% last week and its market cap topped $1 trillion. The company’s CEO painted a massively bullish outlook for AI chips into 2025, which offers investors more upside.
Although Broadcom shares have now doubled compared to a year ago, there’s some rapid growth underway. Earnings are up a staggering 173% over the past year, and revenues have increased by 17%. There’s more room for improvement as new chip sales continue.
Action to take: Investors may want to buy a small position in Broadcom here, and use any market pullback to add to that stake. The chipmakers can be prone to periodic selloffs, and using those drops as an opportunity to buy more should pay off well.
At current prices, Broadcom also pays a 1.2% dividend.
For traders, the March 2025 $270 calls, last trading for about $7.85, could see mid-to-high double-digit returns from here on a continued rally higher in the chip stocks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.