2 Top AI Growth Stocks to Buy in September

Key Points

• Broadcom is benefiting from the surging demand for custom accelerators and Ethernet networking in the data center market.

• Meta's massive investments in AI infrastructure and expanding app ecosystem make it an attractive AI pick in 2025.

• 10 stocks we like better than Broadcom ›

The global artificial intelligence (AI) market is estimated to grow from $279 billion in 2024 to surpass $1.8 trillion by 2030. Semiconductor players have been aggressively supplying advanced chips to build AI infrastructure, while many consumer companies are creating broad AI platforms.

Broadcom (NASDAQ: AVGO) and Meta Platforms (NASDAQ: META) exemplify these two sides of the AI story -- one powering the infrastructure with custom chips and networking, and the other deploying AI at scale across billions of users.

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Here's why shares of these two companies can be smart picks now.

Image source: Getty Images.

1. Broadcom

Broadcom has emerged as a key player in AI infrastructure, with a diversified portfolio of custom AI accelerators, advanced networking solutions, and enterprise software. The company serves several hyperscale customers and large AI model developers, providing them with the custom AI chips and networking technologies required to build large-scale AI clusters.

The numbers highlight the success of Broadcom's business model. In the third quarter of fiscal 2025 (ended Aug. 3), Broadcom reported revenue of $16 billion, up 22% on a year-over-year basis. AI semiconductor sales rose 63% year over year to $5.2 billion.

A major driver of this growth is the company's expanding custom accelerator or XPU business, as hyperscalers have been increasingly opting for custom AI silicon to improve performance and optimize costs. Demand from its existing three hyperscale customers continues to soar. Broadcom expects each of these three customers to deploy 1 million AI clusters by 2027, with a significant portion of these AI clusters involving custom accelerators.

Broadcom has also secured more than $10 billion in AI rack orders from a fourth hyperscaler customer, most likely OpenAI, and expects to commence shipping in 2026.

Networking has also become a significant catalyst for growth. As hyperscalers build massive AI clusters, they are increasingly facing challenges with speed, latency, and power efficiency. Broadcom's Ethernet switches and fabric routers are designed to address these bottlenecks, enabling efficient connection and network congestion management within data centers, as well as across data centers located on multiple sites.

By leveraging open Ethernet standards, Broadcom's Tomahawk switches and Jericho fabric routers provide higher flexibility at lower costs compared to proprietary networking solutions. Hence, Broadcom is well positioned to capture an even larger share of the AI networking market.

The company's enterprise software segment is also gaining momentum. VMware Cloud Foundation (VCF) 9.0, launched this year, enables enterprises to run AI and other workloads securely on private or hybrid cloud environments at lower costs. Software revenue grew 17% year over year to $6.8 billion in the third quarter.

Broadcom's stock is not inexpensive, trading at approximately 36 times forward earnings. However, the valuation seems justified considering the company's leadership in custom AI compute, networking, and enterprise software. With a solid backlog of $110 billion and an expanding customer base, Broadcom looks well positioned as a long-term AI growth story.

2. Meta Platforms

Meta Platforms is no longer just a social media company or a digital advertising giant. By combining an unmatched user base with massive AI investment, the company has rapidly transformed itself into a global AI powerhouse.

In the second quarter of fiscal 2025 (ended June 30), Meta's revenue climbed 22% year over year to $47.5 billion, while net income was a solid $18.3 billion. Operating margin expanded to 43%, and free cash flow reached $8.5 billion. The company returned nearly $11.1 billion through buybacks and dividends, while still ending the quarter with $47.1 billion in cash and $28.8 billion in debt.

Meta is aggressively leveraging advanced AI technologies to enhance content recommendations, user engagement, ad targeting, and ad monetization across its platforms, including Facebook, WhatsApp, Messenger, and Threads.

The company's AI-powered Andromeda ad retrieval models, generative ads recommendation system (GEM), and Lattice ad ranking models have helped boost ad conversion rates on Facebook and Instagram. Instagram Threads is also rapidly gaining traction, with more than 350 million monthly active users as of the end of the first quarter. Threads will soon become a solid monetization avenue for the company in the coming quarters.

Another significant competitive advantage is Meta's open-source Llama ecosystem. Llama models are now used widely by developers, who are often key decision-makers in enterprise technology adoption.

Meta has also planned to spend $66 billion to $72 billion in fiscal 2025 to expand its generative AI capacity by investing in servers, networking, and data centers. The company plans to increase capital investments in AI data center capacity even more in 2026. These investments in AI infrastructure capacity are expected to prove highly lucrative, as the company begins to increasingly utilize in-house AI capabilities at scale to enhance its core businesses.

Despite the many pros, Meta faces significant risks. The company's digital advertising business is highly exposed to the overall state of the economy. The company also faces competitive pressures, while high AI-related capital expenditures can prove to be a drag on its profitability in the short term. But it is undeniable that the long-term prospects of scaling its AI infrastructure and Llama ecosystem remain attractive.

Meta trades at nearly 28.5 times forward earnings, which is not a cheap valuation. However, with strong financials, a growing moat built around its app ecosystem and AI infrastructure, and a commitment to returning significant value to shareholders, the stock appears to be a worthwhile buy now.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.