The Smartest Growth Stock to Buy With $500 Right Now

Many artificial intelligence (AI) investors likely have a decent amount of exposure to the king of AI computing hardware: Nvidia. However, they are far less likely to have exposure to Broadcom (NASDAQ: AVGO), which is openly challenging Nvidia in this arena.

This isn't a made-up challenge either; Broadcom's AI chip business is growing at a faster pace than Nvidia. I think this makes Broadcom a compelling buy right now, as the growth it's expected to put up over the next few years is incredible.

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Broadcom isn't trying to beat Nvidia at its own game

Nvidia and Broadcom are approaching the AI computing sector in two different ways. Nvidia makes broad-purpose graphics processing units (GPUs) that can be deployed in a wide variety of situations and excel in all of them. However, they're not always the most efficient choice in some applications. That's where Broadcom's custom AI chips enter. Broadcom is teaming up with AI hyperscalers to design its own chip, allowing it to tailor their design to what workloads it will see. This makes Broadcom's product more efficient as long as the workload is properly configured, making it ideal for something like AI inference.

Broadcom is seeing demand for these products explode. In its fiscal 2026's first quarter (ended Feb. 1), AI semiconductor revenue rose 106% to $8.4 billion. Within that classification, its custom AI accelerator business grew 140% year over year. There's clearly a ton of demand for its products, and as more and more AI hyperscalers launch their AI chip made in tandem with Broadcom, this number will continue to soar.

By the end of 2027, they expect custom AI accelerator revenue to be above $100 billion. That's a massive increase from today's levels and shows that Broadcom is one of the top stocks to own over the next few years. This is far faster than Nvidia, whose revenue increased at a 73% clip in Q4, an impressive figure on its own. However, you must pay up to own Broadcom versus Nvidia.

AVGO PE Ratio (Forward) data by YCharts.

At 30 times forward earnings, Broadcom holds a premium to its peers. However, I think the higher growth rate is worth it, especially if growth persists past 2027. Most projections are to 2030, but it could be much longer if companies start getting a decent return on investment. Over that timeframe, Broadcom should emerge as one of the top stock performers, and getting in now before the AI chip business really takes off looks like a smart investing move.

Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.