The Market Is Panicking, But You Should Keep Buying Shares of This Artificial Intelligence (AI) Powerhouse

The stock market is going through a bit of a panic moment right now, selling off many artificial intelligence (AI) stocks that were loved just weeks ago. One stock that has been hit particularly hard is Broadcom (NASDAQ: AVGO). Broadcom was one of the top stocks to own in 2026 through the beginning of June, but a poorly received earnings report and a negative AI market sentiment have caused the stock to sell off. At its peak, Broadcom was up about 40% for the year. Now it's up about 9% at the time of this writing.

However, I think now is the perfect opportunity to pounce, and Broadcom's future looks brighter than most.

Image source: Getty Images.

Broadcom's custom AI chip business is booming

While Broadcom does a lot of things as a company, investors' biggest focus is its custom AI chip business. Most companies use graphics processing units (GPUs) for AI, which are powerful and flexible computing units that can handle just about any workload thrown at them. However, those units aren't always the most cost-effective choice, as their flexibility is useless if a computing unit only sees one type of workload during its lifespan.

To remedy this problem, Broadcom is using its chip design expertise and partnering with various AI companies to create its own chips perfectly suited for the workloads they run. These chips often outperform GPUs on a head-to-head basis and often cost less. They're starting to become wildly popular, and 2027 could be the year we see them truly take off.

During its latest quarter, AI semiconductor revenue totaled $10.8 billion, up 143% year over year. However, that business unit is expected to produce more than $100 billion in revenue during 2027. That's major growth, and it's fueled by several of its key AI clients' chips reaching production.

Broadcom called out four key partners in its AI chip business: Alphabet, Meta Platforms, Anthropic, and OpenAI. Right now, Alphabet's TPU (Tensor Processing Unit) is the only chip that's really in production, as the other three companies haven't quite gotten there yet. All of them expect to reach that point in 2027, thus the major growth boost.

This strong outlook is why I'm excited about Broadcom's stock, as it could transform into a major AI powerhouse over the next year. So, any short-sighted viewpoint regarding Broadcom's stock is misplaced. Any time there's a sell-off (like there is now) represents a fantastic opportunity to buy the dip on one of the most promising AI stocks for this year and next.

Keithen Drury has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.