Broadcom's Future $100 Billion Custom Chip Business Is Your Sign to Buy Now
Key Points
Broadcom is partnering with AI hyperscalers to design its custom chips.
The rise in custom chip sales could cause Broadcom's revenue to more than double by next year.
- 10 stocks we like better than Broadcom ›
Few companies will go through as much of a transformation as Broadcom (NASDAQ: AVGO) will over the next year. Currently, it's a large tech company with countless products under its roof, but one is about to become far more important than any other offering: custom AI chips. Broadcom (and the market) are incredibly bullish on this capability, and the company could become a $100 billion business next year.
Considering that Broadcom's revenue over the past 12 months was $68 billion and custom AI chips were only a fraction of that total, everything is about to change for Broadcom, and now is the perfect time to buy.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
Custom AI chips are rising in popularity
Nvidia (NASDAQ: NVDA) currently dominates the AI computing market. Its GPUs are well known to be the best general-purpose chips available, and there's not much that will change that in the future. However, GPUs are expensive and not cheap to run. This stems from the fact that they are designed to run a wide variety of workloads. However, that capability is wasted if the GPU sees one type of workload throughout its service life.
Instead, companies are starting to partner with Broadcom to design an application-specific integrated circuit (ASIC) tailored to run a single type of workload. This provides far greater cost-effectiveness than GPU-based training and inference, though some trade-offs are required to achieve these results.
The most famous example of a Broadcom product is Google's Tensor Processing Unit (TPU). Broadcom and Google have long partnered to design and build these units, and the success of the TPU has caused several other AI hyperscalers to partner with Broadcom to create their own custom chip. These take a while to design and prepare for manufacturing, but there is a massive wave of clients whose custom chips will become available later this year and throughout 2027, which is driving the massive increase.
During Q1, the division that custom AI chips are accounted for delivered 106% year-over-year growth to $8.4 billion, but there are also other products included in that total. So, it's pretty safe to say that current annual sales of custom AI chips are likely below $30 billion. However, by the end of next year, management believes that figure could be above $100 billion. That's explosive growth, and if that pans out, Broadcom could have incredible returns. As a result, I think it's a top AI stock to buy today.
Should you buy stock in Broadcom right now?
Before you buy stock in Broadcom, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $471,827!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,319,291!*
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 11, 2026.
Keithen Drury has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.
Recommended Articles
