Key Takeaways
- Broadcom’s AI‑focused ASIC business is growing far faster than its overall revenue, with AI chip sales projected to jump > 100% YoY in Q2 FY2026.
- The company controls roughly 60 % of the AI‑ASIC market and expects AI chip revenue to exceed $100 billion by FY2027, driven by soaring inference workloads in data centers.
- Although Broadcom’s trailing P/E of 87 looks rich relative to the Nasdaq average (42.5), analysts see earnings growth of 67 % in FY2026 and 61 % in FY2027, justifying the premium.
- If earnings continue to rise at ~40 % annually through FY2028, the stock could approach $1,100 — about 2.4× its current price—assuming it trades at the Nasdaq multiple.
- The Motley Fool’s Stock Advisor did not list Broadcom among its top‑10 picks, but the firm still holds a position in the stock and cites its long‑term AI upside.
Broadcom’s AI Chip Momentum Is Set to Accelerate
Broadcom (NASDAQ: AVGO) designs application‑specific integrated circuits (ASICs) that are “specialized processors designed to perform a single function.” Because ASICs execute one task at high speed with low power consumption, they are “considered to be better suited for AI inference applications over central processing units (CPUs) and graphics cards.” The firm’s AI revenue surged 106 % year‑over‑year to $8.4 billion in Q1 FY2026, while total revenue rose 29 % to $19.3 billion. Management has guided Q2 revenue at $22 billion, implying a 47 % YoY top‑line jump—far above the earlier quarter’s growth.
CEO Hock Tan’s Bold AI Revenue Forecast
During the March earnings call, CEO Hock Tan declared that “its AI chip revenue will reach $10.7 billion in fiscal Q2,” which translates to a 143 % increase over the year‑ago period. He added that the company has a “line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027.” For context, the combined AI revenue from the first two quarters of FY2026 is expected to be $19.1 billion, suggesting a quarterly run‑rate of roughly $25 billion by FY2027—more than double the current run‑rate.
Inference Workloads Fuel ASIC Demand
Industry analysts note that “inference is now taking up most of the computing power in AI data centers.” Deloitte estimates that inference workloads will account for two‑thirds of AI data‑center computing power in 2026, up from 50 % the prior year. This shift is driving a “significant spike in demand for Broadcom‑designed custom AI processors.” TrendForce projects AI‑server ASIC shipments to rise almost 45 % in 2026, outpacing the 16 % increase expected for data‑center GPUs. Broadcom’s commanding 60 % share of the ASIC market positions it to capture the bulk of this growth.
Valuation Looks Stretched but Growth Justifies Premium
Broadcom’s trailing price‑to‑earnings (P/E) ratio sits at 87, well above the Nasdaq Composite average of 42.5. Yet consensus forecasts call for a 67 % earnings increase in FY2026 to $11.36 per share, followed by 61 % growth in FY2027 and 27 % in FY2028. The article notes, “Don’t be surprised if those estimates keep rising, as analysts may be underestimating Broadcom’s earnings growth potential.” With AI chip revenue alone projected to jump more than 2.5× from the current $38.2 billion annual run‑rate to at least $100 billion in FY2027, earnings momentum could outpace current expectations.
Long‑Term Outlook Points to Substantial Upside
Assuming Broadcom’s earnings rise by 40 % in FY2028 from the estimated $18.44 per share, the bottom line would reach $25.82. If the stock then trades at the Nasdaq multiple, the price could climb to roughly $1,097—about 2.4 × its current level. The piece underscores that “the huge investments in AI data centers are unlikely to slow down until the end of the decade,” citing Nvidia’s expectation that hyperscalers’ capital expenditures will grow from $1 trillion in 2027 to $3‑$4 trillion by 2030. This expanding addressable market should keep Broadcom’s ASIC business on a steep growth trajectory.
Investor Consideration: Past the Valuation, Toward the Upside
The Motley Fool’s Stock Advisor did not include Broadcom in its current list of ten best stocks, noting that its past picks—such as Netflix and Nvidia—have generated massive returns for early investors. Nevertheless, the firm holds a position in Broadcom and Nvidia, and the article concludes that “growth‑oriented investors should consider buying this AI giant before it becomes a multibagger.” While the stock’s premium valuation warrants caution, the combination of dominant ASIC market share, exploding inference demand, and a clear path to $100 billion AI revenue presents a compelling case for long‑term appreciation.
Quoted excerpts are drawn directly from the original source to preserve the analyst’s voice and data points.
https://finance.yahoo.com/markets/stocks/articles/prediction-artificial-intelligence-ai-inference-141800267.html