The AI Stock That Could Turn the Tables on the "Magnificent Seven"

The Magnificent Seven isn't just a 1960 Western. In recent times, it refers to seven technology giants that have powered the S&P 500 index's gains. The group is made up of: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. Most, if not all, of these have become household names thanks to their leadership in their respective specialty areas -- from Amazon's e-commerce business to Tesla's electric vehicles.

And all of these companies are participants in the artificial intelligence (AI) space, with some even playing key roles, such as AI chip giant Nvidia. This presence in AI has been one of the reasons investors have flocked to these stocks, as the technology is proving itself to be a game changer and revenue driver.

Though the Magnificent Seven continue to be promising stocks, they aren't the only AI game in town. In fact, one AI stock in particular could turn the tables on this group. Let's check it out.

Image source: Getty Images.

A networking giant

The company I'm talking about is Broadcom (NASDAQ: AVGO). This player is a networking giant, with a presence across devices such as smartphones and tablets and a growing role in AI data centers. This position in AI, unsurprisingly, is driving growth today.

Broadcom offers AI customers a variety of products, including switches and routers to connect nodes of compute within data centers, and it also offers chips, called XPUs. What's fantastic about Broadcom is that it doesn't directly compete with chip leaders Nvidia and Advanced Micro Devices. Their graphics processing units (GPUs) are general-purpose, serving a wide variety of needs. Broadcom's XPUs are custom chips, designed to suit a specific purpose. This allows the company to carve out a niche -- and this is an easier route to growth than trying to offer a chip that's much like those of Nvidia and AMD.

Soaring AI revenue

The strategy is working, as Broadcom has reported soaring revenue for its AI business and wowed investors with contract wins. For example, in the latest quarter, AI semiconductor revenue surged 74% year over year. And the company predicted that in the first quarter of this year, AI semiconductor revenue will double from the prior-year period to $8.2 billion. This is thanks to demand for custom accelerators and AI Ethernet switches, the company said.

And as the AI data center buildout continues, Broadcom's backlog of orders for AI switches recently reached more than $10 billion.

Meanwhile, Broadcom continues to further differentiate itself from others with a new product: the industry's first Wi-Fi 8 access point and switch system. It's meant to help enterprises using AI gain in security, speed, and more.

All of this makes Broadcom a company that may turn the tables on the Magnificent Seven and emerge as one of the biggest AI winners in the years to come.

Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.