Great News for Broadcom Stock Investors!

On June 3, Broadcom (NASDAQ: AVGO) announced its second-quarter fiscal year 2026 results for the period ending May 3. The company's shares fell off a cliff post-earnings, despite solid revenue and earnings growth, as well as guidance that looked impressive, especially for the company's artificial intelligence (AI) chip business. Broadcom expects semiconductor revenue from AI to grow by over 200% year over year in its Q3, accelerating significantly from the 143% sales growth it posted during Broadcom's second quarter.

Evidently, that wasn't enough to impress the market. But there remain excellent reasons to be bullish on Broadcom, including recent news from Amazon (NASDAQ: AMZN). Here's what investors should know.

Image source: The Motley Fool.

Amazon could soon be selling its AI chips

According to reports, Amazon is in early talks to sell its Trainium AI chips to other companies. So far, the cloud computing leader has mostly used them in-house, within its own data centers. But the fact that it is actively exploring selling them to outside customers strongly suggests that the demand is there. And there is plenty more evidence for that claim. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has already said it was planning to start selling its TPUs (Tensor Processing Units) to select outside customers.

One important takeaway here is that tech companies and other entities that need to train and deploy AI models increasingly see Application-Specific Integrated Circuits (ASICs) -- or specialized chips customized to perform specific tasks -- as legit alternatives to general-purpose GPUs (Graphics Processing Units), and that won't change anytime soon, especially as corporations seek to decrease their reliance on the GPU market leader, Nvidia (NASDAQ: NVDA).

Why Broadcom investors should celebrate

Amazon deciding to sell its AI chips is another bullish signal for the entire ASIC market, where Broadcom is a leader. The company's work in this field is powering strong financial results. In the second quarter of its fiscal year 2026, the company's net revenue increased 48% year over year to $22.2 billion, while its adjusted earnings per share rose 54% to $2.44. Broadcom also posted free cash flow of $10.3 billion, up 60% compared to the prior-year quarter.

Given the developments mentioned above, it seems likely that Broadcom will see sustained demand for its products through the foreseeable future. Importantly, the company has secured a deal with Alphabet to design its TPUs through 2031. Broadcom also has a partnership with Meta Platforms (NASDAQ: META) to help develop its Meta Training and Inference Accelerator AI chips; this deal will run through 2029. It's reasonable to think that Broadcom may sign similar agreements with other corporations in the future.

What does all of this mean for investors? Broadcom remains well-positioned to ride the wave of the AI chip industry, which should grow at a good clip over the next few years, at least, and the company may see outstanding returns along the way. Also, the recent post-earnings dip represents a buying opportunity, considering Broadcom still hasn't fully recovered. Interested investors should seriously consider purchasing the company's shares before it's too late.

Prosper Junior Bakiny has positions in Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.