Prediction: This Artificial Intelligence (AI) Inference Specialist Is Going to Soar After June 3

Broadcom (NASDAQ: AVGO) is one of the most important companies in the artificial intelligence (AI) chip market, but its shares have underperformed the sector this year.

Though Broadcom stock has jumped by 28% so far in 2026, its gains are well below the 74% spike in the PHLX Semiconductor Sector index. This underperformance can be attributed to the stock's expensive valuation. However, Broadcom could get a nice shot in the arm and go on a bull run following the release of its fiscal 2026 second-quarter results on June 3.

Let's look at the reasons why.

Image source: The Motley Fool.

Broadcom is about to step on the gas

Broadcom designs application-specific integrated circuits (ASICs), which are specialized processors designed to perform a single function. As ASICs are meant to perform just one specific task, they can execute the task at a greater speed compared to general-purpose compute chips with low power consumption.

This explains why ASICs are considered to be better suited for AI inference applications over central processing units (CPUs) and graphics cards. As a result, Broadcom's growth has been accelerating in recent quarters. The company reported a 29% year-over-year increase in revenue in the first quarter of fiscal 2026 (which ended on Feb. 1) to $19.3 billion.

However, the company's AI revenue increased at a significantly faster pace of 106% year over year to $8.4 billion. Broadcom has guided for $22 billion in fiscal Q2 revenue. That points to a potential year-over-year increase of 47% in its top line, a significant acceleration over its Q1 growth. It goes without saying that the phenomenal demand for Broadcom's custom AI processors will be the primary driver of growth.

Broadcom CEO Hock Tan noted in March that its AI chip revenue will reach $10.7 billion in fiscal Q2. That points toward a potential 143% increase from the year-ago period. It is worth noting that Broadcom's AI chip revenue increased at a much slower pace of 46% in the prior-year period.

It is easy to see why Broadcom's revenue growth is poised to step on the gas. Inference is now taking up most of the computing power in AI data centers. According to Deloitte, inference workloads will account for two-thirds of the computing power in AI data centers in 2026, well above last year's share of 50%. This, in turn, is leading to a significant spike in demand for Broadcom-designed custom AI processors.

Market research firm TrendForce estimates that ASIC shipments for AI servers could increase by almost 45% in 2026, surpassing the 16% jump in data center graphics processing unit (GPU) shipments. Broadcom is in pole position to make the most of this opportunity, as it controls 60% of the ASIC market. The company's strong share explains why its AI revenue is increasing significantly faster than ASIC shipments.

The good news for Broadcom investors is that the company's AI revenue will continue accelerating in 2027. After all, Broadcom CEO Hock Tan noted on the March earnings call that the company has a "line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027." For perspective, Broadcom's AI revenue in the first two quarters of fiscal 2026 will land at $19.1 billion. The $100 billion revenue forecast for fiscal 2027 suggests a quarterly AI revenue run rate of $25 billion for Broadcom.

That's way bigger than the revenue run rate Broadcom's AI business is clocking so far this year. This significant ramp-up in Broadcom's AI revenue will translate into stronger earnings growth, paving the way for significant stock price upside over the next three years.

Investors should consider looking past the valuation and focus on the stock's upside potential

There's no denying that Broadcom's trailing price-to-earnings (P/E) ratio of 87 is well above the tech-focused Nasdaq Composite index's average earnings multiple of 42.5. The premium, however, is justified by the company's ability to deliver significantly faster earnings growth.

Consensus estimates project a 67% increase in Broadcom's earnings in fiscal 2026 to $11.36 per share. They expect a 61% jump in fiscal 2027, followed by a 27% jump in fiscal 2028.

Data by YCharts

What's worth noting is that the earnings estimates have been moving higher. Don't be surprised if those estimates keep rising, as analysts may be underestimating Broadcom's earnings growth potential. After all, the company's AI revenue alone could jump by more than 2.5x between the current and the next fiscal year (considering Broadcom's fiscal 2026 annual AI revenue run rate stands at $38.2 billion, and it anticipates at least $100 billion in revenue from this segment next year).

The strong growth is likely to continue beyond the next couple of years, as the huge investments in AI data centers are unlikely to slow down until the end of the decade. Nvidia, for instance, expects hyperscalers to increase their capital expenditures from $1 trillion in 2027 to a range of $3 trillion to $4 trillion in 2030. So, Broadcom's addressable opportunity should increase substantially going forward, and the growing prominence of ASICs in custom AI processors will help it maintain terrific earnings growth rates.

Assuming Broadcom's earnings increase by even 40% in fiscal 2028 from the preceding year's estimated earnings per share of $18.44, its bottom line will reach $25.82 in three years. Assuming this AI stock trades in line with the Nasdaq Composite index's earnings multiple at that time, its price could jump to $1,097.

That's just over 2.4x compared to Broadcom's current stock price, which is why growth-oriented investors should consider buying this AI giant before it becomes a multibagger.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.