Prediction: This Is What a $5,000 Investment in Broadcom Will Be Worth by 2028

Broadcom (NASDAQ: AVGO) has been one of the quieter top-performing investments throughout the AI arms race. If you invested $5,000 at the start of the AI arms race in 2023, that sum is now worth more than $32,000. However, investors must look forward, not backward. Luckily, Broadcom's future is brighter than ever, and I think a $5,000 investment now could lead to a much larger sum later.

While it won't be able to repeat the incredible performance it gave investors over the past three and a half years, I think it's still worth buying now.

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Broadcom's custom AI units are becoming popular

Broadcom does a lot of different things as a company, ranging from software to virtual desktops to networking hardware. However, the most exciting product development over the past few years has been its custom AI chips. Instead of going head-to-head with companies in the GPU space, which excel at all types of workloads, Broadcom is partnering directly with AI hyperscalers to develop chips purpose-built for their workloads. These units can provide better performance at a lower price tag than their GPU counterparts, but only when the workloads are properly configured.

Broadcom has several big-name clients, including Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), OpenAI, and Anthropic, to name a few. These companies have all chosen to partner with Broadcom over some other competitors in this space, and the results have been simply incredible.

Broadcom's AI semiconductor revenue is exploding, rising 221% year over year to $16.7 billion. Next quarter, they project $21.7 billion, up 236% year over year. But that's just the start.

In fiscal year 2027, Broadcom expects $115 billion in AI semiconductor revenue. In 2028, that figure is expected to rise to $230 billion. AI hyperscalers are starting to use more and more specialized computing units, and Broadcom is the primary company that's supplying them. What's even more impressive is that Broadcom has secured the supply chain necessary to build these computing units, which makes this position even more concrete.

This projection also makes a lot of sense logically, as the AI hyperscalers are looking to maximize computing output for the money spent, and utilizing a specialty device makes the most sense. While there will always be a need for GPUs, Broadcom's custom AI chips will start to take substantial market share over the next few years.

I think this will lead to a soaring stock price, but where will it be by 2028?

Broadcom is a buy now if this projection is correct

Broadcom forecasts $65 billion in AI semiconductor revenue for FY 2026. Wall Street analysts expect $106 billion in revenue for the full year, so that results in $41 billion in non-AI revenue. If we forecast this to grow at a 10% rate from now until FY 2028, that would lead to $50 billion in revenue.

If it hits its $230 billion in AI revenue by the 2028 mark, that leads to a total of $280 billion in revenue for Broadcom by the end of fiscal year 2028. During its most recent quarter, Broadcom posted profit margins of 44%, but that figure has been steadily rising over the past few quarters. Should Broadcom rise to a 45% profit margin by FY 2028 and trade for an average big tech valuation of 30 times earnings, that would price the stock at $3.78 trillion. Broadcom's current market cap is $2.7 trillion, so this indicates a 118% upside. That would turn a $5,000 investment into nearly $11,000, making Broadcom an excellent stock to consider buying now.

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.