Broadcom benefits from artificial intelligence (AI) infrastructure demand due to its strong market position in networking solutions and application-specific integrated circuits (ASICs).
MercadoLibre operates the largest commerce and fintech ecosystem in Latin America, and the company is making smart investments in its logistics and credit businesses, which should strengthen its dominance.
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Billionaire Stanley Druckenmiller was one of the most successful hedge fund managers in history, generating returns of 30% annually for three decades without a single year. He closed his hedge fund in 2010 and now manages his money exclusively through the Duquesne Family Office.
In the third quarter, Druckenmiller sold its entire stake Broadcom(NASDAQ: AVGO) and bought shares of MercadoLibre(NASDAQ: MELI)a stock often overlooked by investors despite having returned 6,910% since its 2007 IPO.
Druckenmiller is a great source of inspiration, but the trades mentioned above happened in the third quarter, which ended a few months ago. Here’s a more current look at Broadcom and MercadoLibre.
Image source: Getty Images.
The investment thesis for Broadcom centers on its strong presence in networking chips and application-specific integrated circuits (ASICs). The company builds the fastest Ethernet switching and routing chips and has over 80% market share. Building artificial intelligence (AI) infrastructure should drive demand for high-speed networking platforms in the coming years.
In addition, Broadcom is the leading supplier of custom AI accelerators, sometimes called ASICs. The company has long designed AI chips for Alphabetof Google and Meta platformsbut its clientele has expanded more recently to include TikTok parent company ByteDance, OpenAI, and Anthropic. The company also has other important clients including Apple and xAI.
Broadcom reported strong financial results in the fourth quarter of fiscal 2025 (ended November), beating top and bottom estimates. Revenue rose 28% to $18 billion, driven by particularly strong demand for AI semiconductors. Meanwhile, non-GAAP net income rose 37% to $1.95 per diluted share.
Importantly, Broadcom’s custom AI accelerators compete Nvidia GPUs as the engines powering training and inference workloads in data centers. ASICs are generally cheaper, which has led to strong demand from certain large-scale customers. “We see momentum continuing in Q1 and expect AI Semiconductor revenue to double,” CEO Hock Tan said in the press release.
However, while the ASICs themselves are often cheaper than Nvidia GPUs, the system-level costs are generally higher because custom AI chips require custom software tools that must be built from scratch. ASICs also use more expensive optical interconnects. As a result, most analysts expect Nvidia to maintain its dominant position in the market. That might explain why Druckenmiller sold his position.
Regardless, Wall Street expects Broadcom’s adjusted earnings to grow 42% annually over the next two years. This makes the current valuation of 50 times adjusted earnings look reasonable. Indeed, among 53 analysts, Broadcom has an average price target of $461 per share, which implies a 35% upside from the current share price of $342.
MercadoLibre operates the largest commerce and fintech ecosystem in Latin America. Its e-commerce market accounted for 28% of online retail sales in the region in 2024, and its market share is expected to reach 30% in 2026. The company has been successful due to its first-mover status as well as its ecosystem of adjacent services.
To elaborate, MercadoLibre strengthens the network effect inherent in its business model by offering adjacent solutions for advertising, payments and logistics. In fact, it is the largest fintech advertiser and payment processor in Latin America. The company also has the “fastest and most extensive delivery network” in the region.
MercadoLibre reported decent financial results in the third quarter, despite missing the consensus estimate on the bottom line. Revenue rose 39% to $7.4 billion, driven by solid sales growth in the commerce (33%) and fintech (49%) segments. This was the 27th consecutive quarter in which revenue growth exceeded 30%, according to management.
Meanwhile, MercadoLibre’s operating margin fell 70 basis points and GAAP earnings rose just 6% to $421 million. But these disappointing figures were due to strategic investments that strengthen its market position and lay the foundations for stronger growth in the future. For example, MercadoLibre lowered its free shipping threshold in Brazil and launched its credit card in Argentina.
Indeed, those investments are already paying off to some extent. Unique shoppers in Brazil grew 29% in the third quarter, the fastest pace in four years. The number of items sold in Brazil also increased by 42%, meaning the average shopper made more purchases. Finally, 60% of Argentine adults do not have a credit card, which gives MercadoLibre the chance to attract a large percentage of the population to its fintech platform.
Looking ahead, Wall Street expects MercadoLibre’s earnings to grow 32% annually over the next three years. That makes the current valuation of 49 times earnings look pretty reasonable. Investors should feel comfortable buying a position today. Among 27 analysts, MercadoLibre has an average price target of $2,842 per share, implying a 42% upside from the current share price of $1,998.
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Trevor Jennewine has positions in MercadoLibre and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, MercadoLibre, Meta Platforms and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Billionaire Stanley Druckenmiller Sells Broadcom Shares, Buys Overlooked Stock Up 6,910% Since Its IPO was originally reported by The Motley Fool
