Broadcom or Oracle: Billionaire Steve Cohen Loads Up on One Top AI Stock

AI has been one of Wall Street's biggest themes for the past few years, and the focus is now shifting from whether the technology will live up to the excitement to how much further its impact can extend.

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The technology is becoming embedded in how companies operate, helping automate routine work, improve efficiency, analyze huge amounts of data, and develop new products and services. Its reach now extends from logistics and customer support to healthcare, cybersecurity, and software development. Some of the world's largest companies are spending billions of dollars to build AI into their operations, while a new generation of firms is competing to develop the technology that could shape the next decade.

Billionaire Steve Cohen, founder of Point72, a hedge fund managing about $35 billion in assets, believes the opportunity still has a long way to run.

"This is a 10- to 20-year theme. It's gonna affect everybody in how they conduct their lives, how they do their business," Cohen said. "We're still in the first, second inning of something that's going to be transformational for the economy and the world… It is such a dramatic, important shift that to ignore it, I think it's a mistake."

Cohen is putting that view into practice through his fund's portfolio. The billionaire investor, whose fortune is estimated at about $23 billion, has recently been making moves involving two top AI stocks – Broadcom (NASDAQ:AVGO) and Oracle (NYSE:ORCL). While Cohen has been snapping up shares of one, he has slashed his exposure to the other. So, let's find out which AI giant he has been leaning into recently.

Broadcom

Broadcom has become one of the biggest beneficiaries of the AI spending boom, but its role goes well beyond selling a single type of chip. The company supplies custom AI accelerators alongside networking technology needed to connect vast numbers of processors inside modern data centers. This combination gives Broadcom exposure to computing demand and the infrastructure required to keep massive clusters operating efficiently.

A particularly important part of Broadcom's position comes from custom accelerators developed specifically for large technology customers. Rather than competing with Nvidia primarily through general-purpose GPUs, Broadcom works directly with hyperscalers to create processors optimized for their own workloads. Google has long been a key customer, while relationships involving Meta, OpenAI, and Anthropic have expanded its presence within AI infrastructure. Broadcom now has six core XPU customers, giving the company another path toward benefiting from hyperscalers building their own silicon.

Networking provides another important piece of Broadcom's AI strategy as computing clusters continue getting larger. Its portfolio includes Ethernet switches, networking fabrics, optical components, DSPs, retimers, and related products responsible for moving data between accelerators. Broadcom has introduced 102.4-terabit Ethernet switching technology alongside next-generation optical products designed for demanding data-center workloads. This broad portfolio allows the company to participate in both processing and connectivity, creating several ways to benefit from continued infrastructure spending.

Competition remains fierce, however, and Wednesday offered investors another reminder after Marvell expanded its relationship with Google. The agreement covers numerous TPU-related programs, including accelerators, storage controllers, and networking technology, potentially challenging areas where Broadcom has enjoyed a strong position. The expanded partnership raises concerns that Google could shift more semiconductor work toward Marvell, adding another competitive threat for Broadcom.

Broadcom's latest earnings results demonstrate how high investor expectations have become. Fiscal second-quarter revenue climbed 48% year over year to $22.2 billion, while AI semiconductor sales jumped 143% to $10.8 billion. Management expects that category to reach $16 billion during the third quarter, representing growth exceeding 200% from last year. However, that outlook fell short of recent investor expectations, while management reiterated its fiscal 2027 AI revenue forecast above $100 billion.

Given the stock's lukewarm performance lately, billionaire investor Steve Cohen appears to be searching for opportunities elsewhere. His Point72 fund reduced its Broadcom position by about 55% during the second quarter, unloading 1,242,728 shares from its portfolio.

On Wall Street, RBC analyst Srini Pajjuri still believes Broadcom holds the leading position in scale-out switching while maintaining considerable strength within optical connectivity. However, Pajjuri does not believe Broadcom's technological leadership necessarily makes AVGO worth buying at its current valuation.

"We expect the stock to remain range bound given limited near-term upside potential, premium valuation to NVDA, and lack of incremental catalysts," Pajjuri said. Accordingly, the analyst assigns AVGO shares a Sector Perform rating (i.e., Neutral), while his $400 price target implies about 10% upside for the next 12 months. (To watch Pajjuri's track record, click here)

The rest of Wall Street is far more bullish on Broadcom, with AVGO earning a Strong Buy consensus rating based on 23 Buys and three Holds. The average 12-month price target stands at $512.45, implying about 41% upside from current levels. (See AVGO stock forecast)