Broadcom Stock Investors Just Got Incredible News from Apple CEO Tim Cook

Broadcom (NASDAQ:AVGO) has been on fire in recent years, but those gains have been plagued by volatility. The chipmaker has gained 649% since the start of 2023, but has fallen by 10% or more at least nine times. Moreover, in early 2025, the stock crashed 41%, so ownership requires a long-term focus.

Much of the volatility stems from uncertainty about the future adoption of artificial intelligence (AI). Yet seasoned investors will recognize that while AI represents a growing opportunity for Broadcom, its legacy business still has room to run.

Indeed, Apple (NASDAQ:AAPL) CEO Tim Cook just made an announcement that underscores this point and should be of keen interest to Broadcom shareholders.

Image source: The Motley Fool.

Apple's significant commitment

In a press release that dropped this week, Apple announced a new multiyear deal with Broadcom. As part of the agreement, Broadcom will help the iPhone maker "design and produce custom silicon components and cutting-edge wireless connectivity technologies for a wide range of Apple products." The $30 billion deal is expected to result in more than 15 billion chips made in the U.S. and will include a $1.5 billion expansion and modernization in Broadcom's facility in Fort Collins, Colorado.

The components in question support radio signals used by iPhones for 5G data and voice transmission, Wi-Fi, GPS navigation, Bluetooth, and more.

In a filing with the Securities and Exchange Commission (SEC), Broadcom revealed it will help the iPhone maker "develop and supply a range of custom ASIC [application-specific integrated circuits] silicon products for use in multiple generations of Apple products" through 2031.

This shows that AI isn't Broadcom's only opportunity for growth in the coming years.

What the future holds

Broadcom's financial results have been impressive, despite ongoing concerns about the future of AI. In its fiscal 2026 second quarter (ended May 3), the company generated record revenue of $22.2 billion, up 48% year over year, driving adjusted earnings per share (EPS) of $2.44, a 54% increase. It's worth noting that AI-related chip revenue accounted for less than half of Broadcom's total revenue.

Management believes the company's growth will continue to accelerate. For the third quarter, Broadcom is guiding for revenue of $29.4 billion, which would represent an increase of nearly 84%, fueling adjusted EBITDA of $20 billion, up 100%.

Broadcom continues to lean into what CEO Hock Tan calls the "insatiable" demand for the company's custom AI chips -- dubbed XPUs. It has signed major chip deals with Alphabet and Anthropic, and expanded its relationship with Meta Platforms. The revenue from these deals won't be reflected in Broadcom's financial results until late 2027 or early 2028 -- but taken together, the impact will be significant.

To be clear, demand for AI makes up a large chunk of Broadcom's business, but its legacy wireless business took center stage this week, as Apple's $30 billion commitment over the next five years helps illustrate the opportunities that exist outside the AI distortion field.

Overall, Wall Street estimates that Broadcom will generate revenue of $106 billion in 2026, and $172 billion in 2027, and $229 billion in 2028, more than doubling its revenue over two years. Yet some believe even those estimates are conservative.

Despite the multipronged opportunity, Broadcom stock is selling for less than 21 times next year's expected earnings. Furthermore, when measuring its valuation using the price/earnings-to-growth (PEG) ratio -- which is more effective for valuing high-growth stocks -- it returns a multiple of 0.54, when any number less than 1 indicates an undervalued stock.

Taken together, the evidence suggests the runway ahead for Broadcom is long, and the stock is a buy.

Danny Vena, CPA has positions in Alphabet, Apple, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.