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The Nasdaq Update for Semiconductor & A.I. stocks

Investors use indices to benchmark relative and absolute performance over time. The goal is to understand how different investments perform overtime. Now the reality is that most investors are better off investing in the broad market index than buying individual stocks. Let me explain why.

Investing is a competitive sport. Everyone is chasing the same few ideas across the board. Those same investors are reading the same press releases for the same tickers everyday. If you don’t have an informational advantage, you need to find another edge.

For many investors, I recommend choosing a niche you are most familiar with. You will still be competing with the best money managers in the industry. However you will have an informational edge against the broad market index.

For example, if you work on cutting-edge semiconductor technology, chances are very few people understand the cyclicality of the chip industry. Which means you have industry knowledge of when to deploy capital, and when not to. This simple advantage can compound in favor for decades.

This is why I focus on the Nasdaq-100 index (NDX) as opposed to other indices. It is concentrated on major tech stocks and the weightings are transparent. Year-to-date the NDX is up 31% for the year. Slightly better than the S&P 500, slightly worse than the Nasdaq Composite. The Composite has more than 2,500 stocks so the small cap tailwind delivered the 400 basis point win this year.

Either way, it was a prosperous year for everybody. Now let’s dive into some market updates related to the Nasdaq-100.

Three Tech Stocks Updating Revenue Segments

For the past few months, I’ve been using Finchat’s fundamental charting tool to compare stocks. This is a product I’ve always wanted to build internally. They provide +20,000 metrics for investors to review key performance indicators and segments. The dataset comes from S&P Global’s Capital IQ.

Finchat alerted me about three companies that updated their revenue segments. Let’s look into Broadcom, Adobe and Applied Materials.

Broadcom, welcome to the trillion dollar club

For the past two years, everyone has been talking about the Big Tech stocks and how they will change the future. However, I never saw Broadcom mentioned until very recently. They joined the trillion dollar club yet no one knows what they do.

I’ve only seen the name three times: the AVGO merger, the buyout of CA Technologies and the acquisition of Symantec Enterprise. None of these deals were consumer oriented so you probably missed out on the news this past decade. Even in the Symantec deal, Broadcom only bought the enterprise unit. The consumer division was sold to Gen Digital.

Today, Broadcom is the sixth-largest semiconductor company globally with +$30 billion in annual revenue. It sells 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets. Broadcom is a massive business.

Broadcom's AI-related revenue surged by 220% year-over-year, reaching $12.2 billion. This growth was fueled by strong demand for custom AI chips and networking components essential for generative AI infrastructure.

For me, this stock is paired well with Nvidia. The A.I. tech boom jumpstarted Broadcom’s stock this year. So far Broadcom is up 120% this year. I don’t think this will dictate future performance but I would be surprised if it doesn’t go up double-digits in 2025. The demand for GPUs is off the charts.

And remember, Broadcom supplies semiconductor chips across multiple product lines. If you think generative A.I. software tools are good today, wait until the hardware catches up. We haven’t even seen what autonomous vehicles and robots will need next.

Applied Material is a major supplier for semiconductors

To be honest, this is the company I knew least and wanted to better understand. Applied Materials is the largest semiconductor wafer fabrication equipment, or WFE, manufacturer in the world. They deliver materials engineering solutions for the semiconductor, display, and solar industries.

This is a lot of information. Unfortunately I don’t have time to research all semiconductor supplies or how Broadcom orders materials, but I’m keeping a watchful eye. Since the supply chain shock in 2021, the semiconductor industry has been operating at full capacity. Now the A.I. boom is driving demand much greater than it was before.

Obviously Nvidia is leading the way but it’s worth looking at the other industry players. In this case, Applied Materials also supplies the solar panel industry. A.I. has an energy constraint problem when it comes to compute, so renewable energy is a viable alternate source now. Either way, keep an eye on this $137 billion player.

Adobe is a sleepy giant for generative A.I.

Besides using Adobe Acrobat to read PDFs, I never think about Adobe. It’s a sleepy stock that continues to compound capital at a very high return. Today the stock is worth $200 billion dollars. It’s a massive tech business but you would never know if you are outside of the creator industry.

It’s hard to comprehend how much Adobe customers are spending on different products and services. Shantanu Narayen, the CEO of Adobe, has done a fantastic job with the company since 2007. Today I think they will continue to lead on the digital media front.

For a while, I thought the company Adobe would lose significant market share to Canva. Creating social content seamlessly is a very hard product to create. Canva is tiny in comparison and might IPO around $30 billion. However, I think Adobe is well-suited to capture more A.I. related design resources.

Google’s Veo 2 and OpenAI’s Sora are impressive A.I. video products but I would bet Adobe has a similar competing product under the wraps. Don’t underestimate someone who is an industry expert. Adobe has proven they can compound value at high margins over multiple decades.

P.S. If you are looking for more detailed content, I recommend reading our recent posts on MSCI and Morningstar. These are both popular benchmark products for investors. MSCI has the most profitable index fund product on the street. Morningstar Direct is one of the most popular benchmarking tools for financial advisors.