Here's What $10,000 Invested in Broadcom Will Be Worth by 2028

When investors think about AI chipmakers, they may think first of Nvidia or AMD. However, one competitor that most forget about is Broadcom (NASDAQ: AVGO). Why? It's simple: Broadcom only makes computing units for giant customers, not consumers. However, this is a huge opportunity that shouldn't be ignored, because the growth that Broadcom's management team is guiding for is simply incredible.

If you've got $10,000 sitting around (or any other dollar figure, for that matter), I can think of few better places to invest it, because that $10,000 could be worth $20,000 by the end of 2028.

Image source: The Motley Fool.

What makes Broadcom different?

AMD and Nvidia make graphics processing units (GPUs), parallel processors that are great at handling a wide range of computationally heavy workloads. GPUs don't have a weakness, but their potential often goes underutilized. Countless GPUs have been stuck running a single type of workload throughout their service life, which leaves some of their incredible capabilities wasted. AI hyperscalers would be better off using a purpose-built computing chip in these applications, which is where Broadcom steps in.

Broadcom partners with its hyperscaler clients to design custom AI computing units powered by proprietary chips that only have the capacities that the client's workloads require. While these units aren't as flexible as GPUs, they provide far better cost performance than a GPU on properly configured workloads. This helps AI hyperscalers maximize their computing potential at lower cost, which is particularly appealing as funds become harder to come by.

Broadcom has several big-name clients, including Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms, Anthropic, and OpenAI. While all of its clients are ramping up their AI infrastructure spending, none have had a more successful product than Alphabet. Alphabet and Broadcom collaborated to design the Tensor Processing Unit (TPU). This unit has been around for a while, and has gone through several generations. Google Cloud clients can rent access to TPUs on that computing platform. But TPUs are so impressive that Alphabet has begun to expand beyond leasing their compute power in its data centers, and is now starting to sell them directly to external customers like Meta as well.

Orders for custom AI chips across the board are ramping up, and that's the reason why Broadcom could be an excellent investment to make right now.

Broadcom's chip business will grow about 4x in two years

This year, Broadcom expects its AI semiconductor revenue to come in around $57.6 billion. Next year, that figure is expected to rise to $115 billion. To top it off, Broadcom also has visibility to $230 billion in AI semiconductor revenue by 2028, and has secured the supply chain to deliver on this projection. That's about a fourfold increase in two years, which is simply incredible.

But what will that mean for Broadcom's stock?

Broadcom also has non-AI businesses, but these aren't growing nearly as fast. Wall Street analysts estimate $106 billion in revenue this year, indicating about $48 billion in non-AI revenue. If these businesses grow at a 10% clip in 2027 and 2028, that would indicate $58 billion in non-AI revenue. Altogether, that's about $288 billion in revenue by 2028.

AVGO Revenue (TTM) data by YCharts.

In its most recent quarter, Broadcom generated a 44% profit margin, but let's reduce that to 40% to bake some conservatism into the estimate. Revenue of $288 billion and a 40% profit margin indicates $115 billion in profit. If we assign Broadcom a reasonable 30 times earnings, that would result in a $3.45 trillion company.

Currently, Broadcom is a $1.65 trillion company. So, a $10,000 investment now will easily turn into $20,000 by the end of 2028 if the projections above pan out.

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