Soumya Eswaran
4 min read
In This Article:
Baron Funds, an investment management company, released its “Baron Technology Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. Market trends are often driven by sentiment in addition to fundamental elements, and the first quarter of 2025 was a clear example of this. January saw a strong performance for the Fund, driven by investor excitement around long-term growth trends in AI. Optimism was fueled by expectations of the new Trump administration's policies to accelerate economic growth. However, by mid-February, fears of tariffs, a potential trade war, and geopolitical shifts reversed market gains, leading to significant volatility. In the first quarter, the fund fell 14.80% (Institutional Shares), underperforming an 11.64% decline for the MSCI ACWI Information Technology Index (the Benchmark) and a 4.27% decline for the S&P 500 index. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Baron Technology Fund highlighted stocks such as Broadcom Inc. (NASDAQ:AVGO). Broadcom Inc. (NASDAQ:AVGO) designs and develops various semiconductor and infrastructure software solutions. The one-month return of Broadcom Inc. (NASDAQ:AVGO) was 23.82%, and its shares gained 60.56% of their value over the last 52 weeks. On May 12, 2025, Broadcom Inc. (NASDAQ:AVGO) stock closed at $221.58 per share with a market capitalization of $1.042 trillion.
Baron Technology Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2025 investor letter:
"Broadcom Inc. (NASDAQ:AVGO) is a leading fabless semiconductor and enterprise software company, with approximately 60% of revenue generated from semiconductors and 40% from software. The company’s focus on high performance AI compute and networking solutions, coupled with its disciplined execution in software, positions it as a strategic leader in critical technology markets. Broadcom delivered a strong quarter, beating expectations for both semiconductors and software. AI remained the key growth engine – reaching a $4.1 billion quarterly run rate, up 77% year over-year – driving a solid ramp in semiconductor revenue, even as non-AI segments like wireless and industrial declined. Software surged, fueled by VMware integration and a shift to subscriptions. Management projected continued AI momentum and steady software execution, with a more pronounced AI ramp expected in the second half. Despite strong quarterly results, the stock retreated amid the same AI-related skepticism as NVIDIA, but primarily due to the broad market pullback on tariff and trade-relations concerns. We remain confident Broadcom is on track to win with its three custom AI accelerator customers and will capture the majority share in the custom-compute space. Broadcom’s lead customer, Google, just rolled out its 7th generation TPU, nicknamed Ironwood, and as Broadcom’s two unnamed (but well speculated) non-Google customers gain traction, confidence in the broader pipeline of four additional partners should strengthen, supporting continued growth in Broadcom’s AI business. We spent two hours with Broadcom’s CEO Hock Tan in March, and he told us in no uncertain terms that “all of them will aggressively ramp and push custom accelerators.”
