A Leading Hedge Fund Just Placed Massive Bets on Broadcom and Intel Stocks. Should You Follow Suit?

A Leading Hedge Fund Just Placed Massive Bets on Broadcom and Intel Stocks. Should You Follow Suit?

Keithen Drury, The Motley Fool

Wed, August 26, 2026 at 6:40 PM GMT+3 5 min read

Broadcom (NASDAQ: AVGO) and Intel (NASDAQ: INTC) have produced quite different results for their shareholders so far in 2026. Broadcom is lagging the market with a gain of just 3%. Meanwhile, Intel has soared by over 135%. However, what matters for investors now is what's coming for those chipmakers over the next few years.

That's the kind of thinking that motivated Coatue Management, run by billionaire Philippe Laffont, to buy shares of both of these companies in the second quarter. Coatue Management increased its Broadcom stake by 6% in Q2, and it now makes up about 4.5% of the fund's holdings. Intel was a brand new position, and Laffont made it a meaningful one: It now accounts for about 3.5% of the portfolio. That's a fairly sizable chunk of the hedge fund's holdings in two stocks, but are they worth buying at their current prices?

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The market is looking toward the future with these two

If you use a valuation metric like the trailing price-to-earnings (P/E) ratio, both of these stocks look horribly overvalued. Intel doesn't even have a P/E ratio because it has been unprofitable over the past year, while Broadcom trades at 60 times earnings. That makes these two a head-scratching investment, at least from this perspective.

But Laffont and Coatue Management aren't buying these two stocks for what they are; they're buying them for what they can turn into.

For Broadcom, its custom artificial intelligence (AI) chip business is on course to take off in 2027. More and more hyperscalers are partnering with Broadcom to develop application-specific integrated circuits (ASICs) to handle some of their AI workloads.

These devices are far less flexible than graphics processing units (GPUs), but they can be more efficient and more cost effective when used for properly configured workloads of the type that they're designed to handle. This gives hyperscalers more computing power and bandwidth at a lower price. Broadcom management told investors that 2027 will be a year of incredible growth, as several of its clients plan to start churning out the custom AI chips it helped them design next year. Management believes that its AI semiconductor division will generate over $100 billion in revenue in 2027, a major increase from current levels.

Intel is in a similar boat, as it's in the process of rebuilding its foundry business. Just a year ago, Intel was being left for dead by investors after it said it was considering shuttering or spinning off its foundry business. A shutdown would have been a huge loss for the chip industry, but Intel seems to be turning the corner in part due to a few major investors that are partnering with it to fund improvements, including the U.S. government. This is starting to pay off, as Intel's foundry revenue rose 31% in Q2, and its overall revenue rose 25%. While it still lost money on a generally accepted accounting principles (GAAP) operating basis, it generated $7 billion in cash from operations.

Intel is starting to turn the corner, which has led to its strong 2026 stock performance, but is it still a good pick?

Forward-looking valuation metrics paint a different picture

These stocks may look expensive from a trailing perspective, but each company is expected to deliver strong growth over the next few years. As a result, I think forward-looking earnings measures offer a more meaningful way to value them.

Trading at just 18 times next year's earnings, Broadcom looks like a solid bargain, while Intel, at 43 times next year's earnings, looks expensive.

As a result, I think that Broadcom would be a great stock to scoop up now, as the market hasn't yet priced in any of the major gains expected to come about in 2027. Meanwhile, the market may have gotten ahead of itself with Intel, as it has a lot of growing to do if it's going to justify its current share price.

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Keithen Drury has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom and Intel. The Motley Fool has a disclosure policy.

A Leading Hedge Fund Just Placed Massive Bets on Broadcom and Intel Stocks. Should You Follow Suit? was originally published by The Motley Fool