1 Unstoppable Stock to Buy Before It Joins Microsoft in the $3 Trillion Club

Microsoft is the fourth-largest company in the world with a market cap of $3.5 trillion, reaching this position thanks to its diversified businesses that are benefiting from the growing adoption of artificial intelligence (AI).

From cloud computing to productivity to gaming, Microsoft offers a range of products and services that have been driving healthy growth for the company. However, there's another tech stock that has been outperforming Microsoft over the past year.

Shares of Broadcom (NASDAQ: AVGO) have appreciated 28% over the past year, while Microsoft stock has dropped 7%. Broadcom is currently the eighth-largest company in the world with a $1.9 trillion market cap. I won't be surprised to see this semiconductor giant rise substantially and join Microsoft in the $3 trillion market cap club. Let's look at the reasons why.

Image source: Getty Images.

Broadcom's growth is poised to accelerate nicely thanks to growing AI chip demand

Broadcom's custom AI processors and networking chips put the company in a terrific position to deliver healthy growth. The company's revenue in the first six months of fiscal 2026 increased by 39% year over year to $41.5 billion. However, Broadcom anticipates serious acceleration in growth in the recently concluded fiscal Q3.

The company expects an 84% year-over-year jump in revenue for the quarter to $29.4 billion. Broadcom's booming AI chip business will drive this outstanding growth. The company estimates that its AI revenue in fiscal Q3 increased by more than 200% year over year to $16 billion. The good news for investors is that Broadcom predicts further growth in its AI revenue in fiscal 2027.

The chip designer sees its AI semiconductor revenue exceeding $100 billion next fiscal year, which would translate into a substantial uptick in its quarterly revenue run rate compared with this year. Broadcom management noted in its June earnings call that its long-term agreements with AI customers such as Anthropic, Meta Platforms, OpenAI, and Alphabet's Google will play a central role in accelerating growth.

In fact, Broadcom is confident of maintaining its robust AI revenue growth in fiscal 2028 as well, thanks to the long-term agreements it has in place with six core customers. For instance, Broadcom is on track to deploy 1 gigawatt (GW) of AI computing capacity for Anthropic this year, in partnership with Google. It anticipates the deployment for Anthropic to jump to more than 3 GW in 2027.

This explains why Mizuho analyst Vijay Rakesh expects Broadcom's revenue from Anthropic to double to $42 billion in 2027 from $21 billion this year. So, the other multi-generation agreements Broadcom has in place with customers explain why analysts expect its revenue to jump by more than 2x in just two years.

Data by YCharts

Importantly, Broadcom can sustain such healthy growth levels for a longer period. That's because the custom AI chip market is expected to generate $308 billion in revenue in 2035, according to Globe Market Research. That translates into a compound annual growth rate (CAGR) of 24% over the next decade. Similarly, the data center optical interconnect market is poised to grow 10x between 2024 and 2030, generating $144 billion in revenue by the end of the decade, according to China Insights Consultancy.

Broadcom is a key player in both these markets. It reportedly controls 70% of the custom AI chip space and is considered to be among the leading players in the optical networking market as well. All this explains why analysts have become bullish about Broadcom's long-term earnings growth prospects.

Data by YCharts

The math behind a $3 trillion valuation

Broadcom's earnings could increase by 70% in the current fiscal year to $11.63 per share, according to consensus estimates. The good news is that it is expected to continue growing at a solid pace over the next two years as well.

Data by YCharts

The chart above tells us that Broadcom's earnings growth in fiscal 2027 could match fiscal 2026 levels. The forecast for fiscal 2028 suggests a 35% increase in its bottom line, though it could do better than that due to the multi-year agreements it has in place with major AI companies.

Broadcom stock trades at 21 times forward earnings. That's a discount to the tech-laden Nasdaq-100 index's forward earnings multiple of 26. Ideally, Broadcom deserves to trade at a premium valuation in the future due to its accelerating growth. However, even if it trades in line with the Nasdaq-100 index's forward earnings multiple at the end of fiscal 2028, its stock price could reach $686 (assuming earnings per share of $26.38 in fiscal 2028, as seen in the previous chart).

That's a potential jump of 77% from current levels, which will be enough to take Broadcom's market cap beyond $3 trillion. So, this AI stock has the potential to join Microsoft in the $3 trillion club in the next two years, giving investors a solid reason to buy Broadcom and hold it for the long run.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.