Investors Rotating Out of Tech Are Making a Mistake. This AI Growth Stock's Revenue Just Hit a Record.

Over the past year, many of the top tech stocks lost their momentum as the Fed's reluctance to cut interest rates, escalating geopolitical conflicts, and other macro headwinds drove investors toward more conservative sectors. Some investors also likely worried that the artificial intelligence (AI) market -- which had generated strong tailwinds for many tech companies -- would cool off as companies reined in spending to address near-term challenges.

However, Broadcom (NASDAQ: AVGO), a bellwether of the AI market, just set a new record high earlier this month and is up nearly 140% over the past 12 months. Its annual revenue also reached a record high of $63.9 billion in fiscal 2025 (which ended last November), and analysts expect its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow at CAGRs of 47% and 46%, respectively, from fiscal 2025 to fiscal 2028.

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Broadcom has an enterprise value of $2.02 trillion, yet it looks surprisingly cheap at 18 times next year's adjusted EBITDA. Let's see why this AI growth stock is firing on all cylinders -- and why it indicates that investors shouldn't hastily retreat from the tech sector.

Why is Broadcom a bellwether of the AI market?

Broadcom doesn't produce data center GPUs like Nvidia (NASDAQ: NVDA). Instead, it produces custom application-specific integrated circuit (ASIC) AI accelerators for hyperscalers.

While Nvidia's GPUs are used to train large language models (LLMs) and other AI algorithms, Broadcom's custom AI accelerators are used to accelerate inference tasks. In other words, Nvidia's GPUs are used to process large amounts of data so AI applications can read them, while Broadcom's chips help those applications access all of that data.

When deployed at scale, Broadcom's AI accelerators can process inference tasks more cost-efficiently than Nvidia's stand-alone GPUs. That's why the top hyperscalers -- including Meta and Alphabet's Google -- have been ordering more custom AI accelerators from Broadcom to reduce their long-term dependence on Nvidia and control their soaring data center expenses.

Broadcom sells other types of non-AI chips for the mobile, data center, networking, wireless, storage, and industrial markets. It also expanded its infrastructure software business over the past few years with several massive acquisitions. But over the next few years, most of its growth will likely come from its custom AI accelerators rather than its non-AI businesses.

In fiscal 2025, Broadcom's sales of AI chips soared 65% to $20 billion, accounting for 31% of its top line. It expects that figure to surge to $60-$90 billion by the end of fiscal 2027 (which would account for 38%-57% of its projected revenue). It can also bundle those chips with its infrastructure software and non-AI chips to lock in its customers and boost its profits.

The market still has plenty of room to expand

According to Grand View Research, the AI market could grow at a 30.6% CAGR from 2026 to 2033 as more enterprises adopt generative AI and agentic AI technologies. In other words, there could be plenty of room for Broadcom, Nvidia, and other AI companies to flourish without trampling on each other. These top AI stocks could still be undervalued relative to their long-term growth potential, even though many are already valued at trillions of dollars.

So if you're thinking of selling your top tech stocks to rotate to more conservative investments, you could give up some massive long-term gains in exchange for some short-term stability. The next market crash could wipe out some of the flimsier AI stocks, but resilient market leaders like Broadcom -- which have wide moats and plenty of irons in the fire -- will remain solid growth stocks to buy, hold, and forget for at least the next decade.

Leo Sun has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.