Broadcom Forecasts $230 Billion in AI Semiconductor Revenue in 2028. The Stock Could Reach $900 Per Share as a Result.

Broadcom (NASDAQ: AVGO) just announced some massive news during its most recent earnings call: It expects about $230 billion in AI semiconductor revenue during 2028. That's downright impressive. Considering that Broadcom's trailing 12-month revenue totals less than $90 billion right now, it projects that its total revenue will more than triple from now until the end of 2028.

It doesn't get much better than that for AI investors, and I think this growth could cause Broadcom's stock price to nearly triple to $900 by the end of 2028. That makes it a no-brainer buy today.

Image source: Getty Images.

Broadcom is taking a different approach to AI computing

While broad-purpose graphics processing units (GPUs) are the most popular AI accelerators right now, a lot of their capabilities are wasted in many AI applications. Many GPUs only see one type of workload throughout their entire service life, and a specialized computing unit designed solely around those functions can perform them similarly or better at a lower cost.

That's exactly what Broadcom has done, as it has partnered with several AI hyperscalers to develop application-specific integrated circuits (ASICS) -- custom AI chips perfectly tailored for their workloads. Broadcom's impressive client list is headed by such giants as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), OpenAI, and Anthropic. Alphabet's Tensor Processing Units (TPUs) are by far the most produced AI chips that Broadcom designs. It informed investors during its latest conference call that it expects to see demand grow in 2028 and 2029 for TPUs based on the latest generation it's developing.

Other clients are starting to ramp production of their custom AI chips, and that's leading to huge revenue growth for Broadcom. For this year, it expects AI semiconductor revenue to total $58 billion. Next year, that figure is expected to rise to $115 billion, and in 2028, the forecast is for $230 billion. That's a rapid ramp-up, but what's even more important is that Broadcom has secured the supply chain necessary to deliver on that growth. This lowers the execution risk for Broadcom as it expands into a growing market, and if these projections pan out, it makes it a must-own stock.

But how could the stock rise to $900 per share?

Broadcom's margins are shifting

Broadcom doesn't solely design AI semiconductors. Although it projects $58 billion in AI semiconductor revenue this year, Wall Street analysts estimate its total sales will be $106 billion. So its previous core businesses make up around $48 billion. We'll project these business units to grow at a 10% rate, leading to $58 billion in revenue for them by the end of 2028.

Another item that's shifting is Broadcom's margins. It makes more money selling custom AI chips than it does with its other businesses, which is why its margins have risen over the past few years as custom AI chips become a larger part of the business.

AVGO Operating Margin (Quarterly) data by YCharts.

I'd expect this trend to continue, and Broadcom's profit margin could rise about 50% by 2028.

If Broadcom hits its AI semiconductor revenue guidance of $230 billion, combined with $58 billion from existing core businesses, that would total $288 billion in revenue. At a 50% profit margin, that would give it $144 billion in profits. If the market values Broadcom at 30 times earnings, that would give it a market cap of $4.3 trillion. Right now, Broadcom's market cap is $1.7 trillion at a $358 per share price tag. To increase it to $4.3 trillion would require a price of over $900 per share for the stock.

That's nearly a tripling in about two and a half years, which would almost certainly make Broadcom one of the best-performing stocks over the next few years. As a result, I think it's an incredible buy right now, and investors should consider loading up on shares.

Keithen Drury has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.