Here's the AI Chip Stock That Hedge Funds Are Loading Up On
2026-10-24 06:30
•Dave Kovaleski •The Motley Fool
••••• •••••• Axe Cap view
Broadcom’s AI Surge Has Hedge Funds Swapping Sides
Broadcom’s explosive AI chip revenue and upbeat outlook have pushed hedge funds from short sellers to big buyers.
Broadcom’s latest quarterly results caught many off guard with a 221% jump in AI chip revenue, fast-tracking it into hedge funds’ most-loved tech stocks. For South African investors, this signals where global AI computing power is headed. While we don’t have a direct JSE-listed play on AI semiconductors, Broadcom’s strength puts pressure on the rand, as dollar demand for tech growth firms remains high. The USD/ZAR rate could stay elevated if the US tech sector keeps outperforming, limiting relief for rand-based investors in local equities, especially outside commodity stocks. Valuations look reasonable here, with a forward price-to-earnings ratio around 19—a sign earnings growth is priced in but not excessively so. Still, should AI demand disappoint or broad tech sentiment sour, Broadcom’s shares could slide significantly, which in turn would weaken appetite for risk assets in emerging markets. this is just our opinion and not financial advice
We recommend watching USD/ZAR closely for signs of tech sector shifts rather than chasing Broadcom directly. For JSE investors, hold commodity-exposed stocks like AngloGold Ashanti as currency hedges and avoid local banks for now, as rand weakness pressures credit growth.
- Broadcom (AVGO)
- USD/ZAR
- AngloGold Ashanti
- AI adoption slowing unexpectedly
- US tech sector volatility dragging down risk appetite
6/10
Hedge funds dramatically shifted their stance on Broadcom in September, flipping from shorting the stock in August to making it one of their most-held positions. The AI chipmaker's impressive Q3 earnings—with AI semiconductor revenue surging 221% year-over-year to $16.7 billion—drove the reversal. Despite concerns about valuation after a 59% annualized return over three years, analysts view Broadcom as attractive at current valuations with a forward P/E of 19 and strong growth projections through 2028.
Our take is based on reporting first published by The Motley Fool.