You'll Never Believe What Broadcom's CEO Just Said About AI Demand

Broadcom (NASDAQ: AVGO) is probably the least well-known trillion-dollar company. It burst onto the scene just recently, but I think it could be headed much higher. It's currently the eighth-largest company in the world by market capitalization, but after what its CEO said about its growth trajectory, it could end up in the top five before we know it.

So, what did Broadcom's CEO say about demand? Let's take a look.

Image source: The Motley Fool.

Broadcom's AI chip business is exploding

Broadcom does a lot of different things as a company. It has a virtual desktop business through its acquisition of VMware, mainframe hardware and software, cybersecurity, and many other business units. But those aren't the focus of investors. Instead, everyone is focusing on its AI semiconductor business, and for good reason.

The company has two primary AI semiconductor products: custom AI chips and connectivity switches. While connectivity switches are critical for data center operation, the big winner investors are focusing on is the chip business. This segment is going head-to-head with Nvidia, which is no easy task. But it's winning.

Instead of offering a GPU that excels in many computing applications, Broadcom is designing application-specific integrated circuits (ASICs). These chips are specifically designed to handle one workload. ASICs are nothing new, but their usage in AI is. Broadcom has partnered directly with AI hyperscalers to design a chip that fits their needs, which cuts down on costs for the end user because it isn't paying for capabilities that it won't use with a GPU.

GPUs aren't going away forever because their flexibility is necessary in many applications. Still, Broadcom's custom AI chips could start to take market share from Nvidia as they prove their value. During the earnings call for the first quarter of Broadcom's 2026 fiscal year (ended Feb. 1), CEO Hock Tan stated: "Today, in fact, we have line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027. We have also secured the supply chain required to achieve this."

That's huge, because it excludes the connectivity switch business and all other business units. Furthermore, during the past 12 months, Broadcom as a whole generated $68 billion. So, by the end of next year, Broadcom's AI chip business will be far larger than the entire company is now.

As an investor, I could hardly believe that projection. But with the way AI spending is trending, this projection is reasonable. I think this makes Broadcom's stock a screaming buy right now as the market has not priced in this massive rise into Broadcom's stock price yet.

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.