Good morning. QQQs +90bps as AVGO +17% after Hock Tan said “Leather jackets are so 2024.” Well, not exactly, but much better commentary around 26/27 has semi investors even more enamored with ASICs (as if they weren’t already so after MRVL). Is this finally the datapoint that gets semis as a group acting better again? Potentially (NVDA +1.7%; ANET +4.4%; ARM +4%; TSM +2.5%, MU +2.3% early), but at least it points to plenty of alpha to be made if you find the right stocks to be long. If AVGO can talk up out years and have investors look through some weaker seasonal 1H, can MU pull off the same trick next week? Similar set up in terms of sentiment heading into the print. Does shift into semis drive whole mkt higher or do sw stocks underperform today? Is this the start of the Santa Claus rally (last 2 weeks of Dec and first 2 weeks of Jan usually strongest)? I have no crystal ball, but these are questions investors asking this morning….
Trump ran the bell this morning. BTC is flat. China -1%. Yields slightly up.
We’ll hop into AVGO first. TSLA with a couple pieces of good news overnight, including some pretty positive 3p data. CRM ug/NOW dg. MS +ve AAPL. And more. Home stretch now. Let’s get to it…
AVGO +17%: Much better than feared guide but commentary around ‘26/’27 steals the show as Hock Tan saves the day again.
Key points: Mgmt projects $60-90B opportunity with three key hyperscalers (likely Google, Meta, Bytedance) versus $15-20B in 2024, based on million-unit GPU/XPU cluster deployments which include networking ICs In addition, the co mentioned they are working with two new hyperscale customers (likely OpenAI, Apple) which could further expand company’s SAM. This implies a 60% CAGR in their top 3 customers. ‘24 SAM is $17.5B vs AI revs of $12.2B, implying 70% share. Even just assuming AVGO maintains 50% share at top 3 customers and conservative assumptions for additional revs from ramping additional customers, I can pencil in something close to $11 in ‘27. If share held flat at 70% share you get $50B+ of AI revs and ~$12+ EPS (street at $8.50. I’ve heard as high as $14 this morning). So throw 30x on $11-12+ gets you $330+…
On AAPL’s relationship re: developing their own WiFi/Blutooth chip, Hock said: “We continue to be very engaged … in multi-year roadmaps across various technologies we have leadership in, including RF, Wi-Fi, Bluetooth, sensing, and touch.”
In terms of #s, guided to $14.6B vs whispers of $14B. EBITDA guide also beat at $9.64B vs street at $9.3B (EBITDA margin of 66% vs street at 63%). NonAI chip rev will be down in Q1. Sees FY 24 AI revenue of $12.2B. So some seasonality at play in 1H of the year as custom ASICs ramp (networking and infra sw making up some of the gap as well), but bulls will be happy to look through given large opportunity in ‘26/’27. Gotta give Hock Tan credit for saving the juice for the right moment.
All in - great print with much better out year estimates for AI revs. After MRVL’s beat and now this, investor focus continues to shift to ASICs vs NVDA.
TSLA: Trump transition wants to scrap crash reporting requirement opposed by Tesla / Strong 3p data
The Trump transition team wants the incoming administration to drop a car-crash reporting requirement opposed by Elon Musk’s Tesla according to a document seen by Reuters, a move that could cripple the government’s ability to investigate and regulate the safety of vehicles with automated-driving systems.
Musk, the world's richest person, spent more than a quarter of a billion dollars helping Trump get elected president in November. Removing the crash-disclosure provision would particularly benefit Tesla, which has reported most of the crashes – more than 1,500 – to federal safety regulators under the program. Tesla has been targeted in National Highway Traffic Safety Administration (NHTSA) investigations, including three stemming from the data.
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