This AI Chipmaker Looks Like a Bargain With AI Revenue Set to Double Again Next Year

Broadcom (NASDAQ: AVGO) hasn't had the best year. It's only up by 3% so far in 2026, while the S&P 500 has gained 13%. However, on a business level, Broadcom had a tremendous year, and it recently implied that its next two years will be even better.

This forecast has resulted in a compelling buying opportunity for long-term investors.

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Broadcom anticipates AI revenue doubling annually for the next two years

Broadcom has established itself as the leading designer of application-specific integrated circuits (ASICs). These custom-made chips are built to offer a more cost-efficient alternative for handling narrow types of AI workloads, and they have won over many big tech companies. That has given Broadcom impressive revenue visibility for that business unit for multiple years.

For its fiscal 2026 second quarter, which ended May 3, the company's revenue grew 48% year over year, but the AI semiconductor segment's top line more than doubled. However, that wasn't the biggest news. Broadcom told investors to expect AI semiconductor revenue to more than double in its fiscal 2027, and then to double yet again in fiscal 2028.

This growth further highlights Broadcom's commanding position in the ASIC chip space, and confirms that artificial intelligence infrastructure remains in high demand. The growth of the company's AI semiconductor business has also come with higher profit margins. Net income jumped by 88% year over year in fiscal Q2, comfortably outpacing overall revenue growth.

Previously, the company told investors to expect revenue of $22 billion in its fiscal 2026 second quarter, but it actually delivered $22.2 billion in sales. It has become more common for chipmakers to beat and raise guidance, and Broadcom has been following that pattern. With that in mind, the path ahead for its AI semiconductor business may be even better than the back-to-back years of doubling revenue it's forecasting.

The stock hasn't budged much despite the seismic fundamental changes

Broadcom's guidance implies that revenue will accelerate meaningfully in the years ahead. AI semiconductor revenue now makes up more than 60% of Broadcom's total sales. Each time this segment doubles (significantly outpacing the growth of the rest of the business), it will result in AI chips producing a larger percentage of total revenue. That will give it an even stronger influence on future results.

At the same time, Broadcom continues to improve its profit margins. Higher demand for AI products will give the company more pricing power. It already enjoys net profit margins above 40%, but those margins can widen as AI semiconductor revenue surges.

Yet this outcome hasn't been priced into the stock. The mismatch has resulted in a compelling 19 forward P/E ratio, which is a lower valuation by that metric than most companies in the S&P 500. As Broadcom releases additional earnings reports that validate its ambitious targets for fiscal 2027 and fiscal 2028, more investors may pile into the stock.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.