Could Broadcom Be the Best Way to Invest in Artificial Intelligence Right Now?

Broadcom (NASDAQ: AVGO) may be one of the most compelling ways to invest in artificial intelligence (AI) right now thanks to its growing role in custom AI chips and networking hardware. As hyperscalers build out data centers to train models and run inference, more customers are turning to custom silicon that can lower costs and offer greater flexibility in designing AI stacks.

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Broadcom has been a major beneficiary of this shift. The semiconductor giant has been delivering solid earnings results driven by its AI semiconductor revenue. The company is well-positioned in the AI supply chain, and if hyperscalers continue to favor custom chips, Broadcom could be one of the biggest winners of the AI race.

That growth story has already helped push the stock higher over the past year even as investors have occasionally reset their expectations.

Broadcom is up 63% over the past 52 weeks despite a recent dip

Broadcom has traded in a range of $244 to $495 over the past 52 weeks. Over that period, the stock has rallied 63%. But after management's third-quarter guidance failed to clear elevated investor expectations, the stock dropped roughly 2% over the past month.

Today, the stock is currently trading at more than 68 times earnings. That puts Broadcom squarely at a premium to peers like Nvidia, which trades at around 32x. The reason for the disparity is that investors likely think Broadcom's earnings haven't peaked yet and that it can continue expanding by selling custom chips and networking hardware. Its AI revenue could have further room to grow compared with larger competitors that have already delivered solid growth in recent years.

To see why investors are willing to pay that premium, it helps to look at what Broadcom just delivered in its most recent quarter.

AI semiconductor revenue hit $10.8 billion, up 143% year over year

Based on its fiscal 2026 Q2 results, Broadcom delivered record revenue, operating profit, and free cash flow, fueled by rapid growth in AI semiconductor demand and improved operational efficiency.

AI semiconductor revenue rose 143% year over year to $10.8 billion driven by demand for custom accelerators and networking. Consolidated revenue climbed 48% to a record $22.2 billion, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 52% to $15.2 billion, for a 69% margin.

Despite $231 million in capital expenditure (capex), free cash flow increased 60% to $10.3 billion, supported by its capital-light, outsourced manufacturing model.

With results like that, the next question is whether Broadcom can keep the pace up as the year progresses.

Broadcom targets $16 billion in Q3 AI revenue, up more than 200%

Hyperscalers are increasingly turning to Broadcom for custom AI silicon as they look for alternatives to Nvidia's graphics processing units (GPUs). Broadcom has partnered with Google, Anthropic, and OpenAI to develop custom chips.

Management expects Q3 AI semiconductor revenue of $16 billion, up more than 200% year over year, helping drive consolidated revenue up 84% to $29.4 billion. It also expects a non-GAAP operating margin of 67%.

If Broadcom beats its own guidance again, the stock could earn a higher valuation, depending on sustained AI demand and cost control.

All of that sets up the investing question: After a big run and a recent pullback, does the stock still make sense to buy?

Is Broadcom a buy?

A consensus among 42 analysts rates Broadcom a strong buy, a rating that has held over the past three months. The high target price implies a 56% upside from current levels.

Broadcom remains a high-margin infrastructure provider of key AI components. Its recent sell-off could be a healthy valuation reset, potentially offering more upside. If hyperscalers continue to favor custom chips, Broadcom could keep seeing solid growth in AI semiconductor revenue and exceed its guidance, potentially making the stock one of the higher-upside AI investments.

Rick Orford 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.