Think It's Too Late to Buy This Leading Tech Stock? Here's 1 Reason Why There's Still Time.
Key Points
Broadcom stock has been soaring thanks to heavy demand for its custom AI accelerators.
The chipmaker has partnerships with several hyperscalers that should drive continued revenue growth.
- 10 stocks we like better than Broadcom ›
As one of the leading semiconductor companies, Broadcom (NASDAQ: AVGO) has handily outperformed the market recently. It's up 51% year to date (as of Oct. 17), while the S&P 500 index has risen 13%.
Following such a rally, this might not seem like the ideal time to invest in Broadcom -- the stock is trading near its all-time high. Given the tech giant's growth, however, its stock can continue to climb. Here's one reason why.
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A growing list of high-value partnerships
On Oct. 13, Broadcom and OpenAI, the developer of ChatGPT, announced a partnership on 10 gigawatts of custom artificial intelligence (AI) accelerators. Broadcom will be helping OpenAI design its own custom chips, and this is just the latest of several AI companies that are working with Broadcom for that purpose.
Broadcom makes custom AI chips for three major hyperscalers, believed to be Alphabet, Meta Platforms, and ByteDance, the parent company of TikTok. It's seeing increasing chip demand from these companies, and CEO Hock Tan has also mentioned a fourth major customer that has placed $10 billion worth of orders. While there was speculation this mystery customer was OpenAI, Broadcom has now said that's not the case.
Broadcom's share price has been soaring, but it's not fueled by hype. Revenue is on the rise, particularly its AI revenue, which increased 63% year over year to $5.2 billion in Q3 2025. Tech companies are increasingly turning to Broadcom for custom chips that better fit their needs and to avoid being overly reliant on graphics processing units (GPUs) from Nvidia.
During Broadcom's last earning call, Tan mentioned that the company has an order backlog of over $110 billion, an indicator that its excellent revenue growth should continue. Don't let the valuation deter you -- Broadcom's crucial role in AI development makes it one of the stronger tech companies to invest in.
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Lyle Daly has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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