Russell Investments remains focused on sectors in which AI adoption has been ramping up, including industrials, healthcare, and consumer goods. As per the firm, companies that leverage AI for productivity improvements remain well-placed to gain a lasting competitive edge and provide healthy returns. Therefore, skilled active managers are required to look for such companies, primarily those that are in less-covered segments of the market.
Sectors Providing Investment Opportunities
With respect to real assets, Russell Investments sees attractive investment opportunities in real estate and infrastructure, mainly sectors that can benefit from the stabilization of long-term interest rates and favorable relative valuations in comparison to other growth assets. The application of AI in real estate, like data centers and healthcare facilities, continues to emerge as a critical growth area. Furthermore, the infrastructure investments continue to gain momentum from energy utilities and pipeline exposures, given the US administration’s emphasis on expanding LNG (liquified natural gas) production.
The firm also believes that an early focus on deregulation and tax cuts would likely be well-received by equity investors. Overall, an expected US soft landing, together with anticipated policy moderation on trade and immigration, creates specific opportunities for well-positioned portfolios, says Russell Investments.
Our Methodology
We sifted through the holdings of iShares Core S&P 500 ETF and shortlisted the companies that have 10-year revenue growth of over ~10%. Next, we selected stocks that were the most popular among elite hedge funds. We have ranked the stocks in ascending order of hedge fund sentiment.
A technician working at a magnified microscope, developing a new integrated circuit.
Broadcom Inc. (NASDAQ:AVGO)
10-year Revenue Growth: ~26.5%
Number of Hedge Fund Holders: 161
Broadcom Inc. (NASDAQ:AVGO) is engaged in the designing, developing, and supplying of various semiconductor devices. Morningstar believes that the company’s primary valuation drivers revolve around the growth of its AI chip business as well as its capability to extract growth and operating leverage from VMware. The firm also expects continued inorganic growth over the long term. It expects high AI sales to fuel supernormal growth for Broadcom Inc. (NASDAQ:AVGO) over the next 5 years.
Broadcom Inc. (NASDAQ:AVGO)’s strength in both chips and software enables it to earn terrific accounting and economic profits, and Morningstar believes that its competitive positioning will continue to allow it to do so for the upcoming 20 years. As per the firm, Broadcom Inc. (NASDAQ:AVGO) will focus on healthy cash generation. Over the long term, Morningstar expects that the emphasis will be on improving its dividend and bolting on more acquisitions, which can help drive its cash flow. The company is expected to be a significant beneficiary of rising AI spending, which can spur strong growth for its networking semiconductor sales.
Carillon Tower Advisers, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Broadcom Inc. (NASDAQ:AVGO) had a strong quarter, mostly from the two days that followed its earnings release announcing a significant expansion in the addressable market for its custom AI silicon offerings. As a leader in data center connectivity and custom silicon, the company is now considered to be one of the biggest beneficiaries from the growth in AI spending.”
Overall, AVGO ranks 6th on our list of best stocks for 15 years. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than AVGO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.