1 Major Reason Why Broadcom Still Has More Room to Run

Broadcom (NASDAQ: AVGO) has been an incredible stock to own recently. The stock has risen 73% since 2025 began and 16% this year alone. However, I think there's still plenty of room to run.

Broadcom may be a large company ($1.9 trillion, the seventh-largest in the world), but I could see it being a $4 trillion company as soon as next year. That's more than a double in two years, and there's one product that is going to push Broadcom to that level.

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Broadcom's custom AI chips are the new hotness

While Nvidia (NASDAQ: NVDA) still owns the majority of the AI computing market, custom AI chips from Broadcom and others are starting to capture greater and greater market share. These chips offer superior cost performance compared to a GPU, but this all comes at the cost of flexibility. The custom AI chips are designed around a specific workload type and cannot handle anything efficiently outside of that. Still, that's a sacrifice that many are willing to make, so business for Broadcom is booming.

The best example of what a custom AI chip looks like is the Tensor Processing Unit (TPU) that was designed in collaboration with Alphabet. Alphabet has also started selling these computing units to others and made them available to rent via Google Cloud. These TPUs are part of the reason why Alphabet has caught back up in the AI race and also why its cheap AI models cost less than anyone else's.

Despite the success of the TPU, custom AI chips are still a relatively small portion of Broadcom's business. In its fiscal 2026's first quarter, Broadcom's AI semiconductor division generated $8.4 billion in revenue, up 106% year over year. There are other products in this division outside of custom AI chips, so we know that its custom AI chip business brought in less than $8.4 billion during Q1.

However, by the end of next year, CEO Hock Tan says that this segment will deliver more than $100 billion in annual revenue. That's a major jump, and could be exactly what the stock needs to hit a $4 trillion valuation. Wall Street analysts agree with this assessment and project Broadcom's revenue to rise to $158 billion by the end of fiscal 2027, up from $64 billion in 2025. If Broadcom's revenue can more than double in two years, I think the stock is primed to follow suit.

Keithen Drury has positions in Alphabet, Broadcom, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.