Broadcom's Artificial Intelligence (AI) Chip Revenue Just Rose 221%. There's More Growth Coming.

Broadcom (NASDAQ: AVGO) just posted one of the best quarters you'll ever see from a company involved in the AI computing equipment space. It grew its AI semiconductor revenue at a 221% pace during the third quarter of FY 2027 (ended Aug. 2). That's better performance than nearly any of its competitors have ever put up, but that's just the beginning.

Broadcom announced major news about future demand, and there's really only one conclusion after learning about their projections: Buy the stock hand over fist.

Image source: The Motley Fool.

Broadcom expects impressive growth in 2027 and 2028

Broadcom's exposure to AI computing units comes from its custom AI chips. The company partners with AI hyperscalers to design and build chips specifically tailored to their workloads. If done properly, this can provide a computing unit that delivers better performance at a lower cost.

However, the workload must stay consistent. This means that broad-purpose GPUs won't ever be fully replaced, but the market share of custom AI chips could increase.

That's starting to be seen now with some of Broadcom's major clients, including Alphabet, Meta Platforms, Anthropic, and OpenAI, all of which plan to spend more each quarter.

In 2027, Broadcom expects AI semiconductor revenue to reach $115 billion. What's even more important is that Broadcom has secured components to make this growth a reality. Considering that many of the AI hyperscalers are planning years for computing capacity rather than when they'll actually need it, this projection is probably pretty trustworthy (barring a huge reversal in AI usage).

Broadcom also extended this projection to 2028, where it believes AI semiconductor revenue will double again to $230 billion. Once again, it has already contracted a supply to meet this projection.

That's huge growth in just a few years, and it will dramatically reshape what the business looks like. Broadcom's revenue over the past 12 months totaled $89 billion, with AI semiconductor revenue accounting for only about half of that total.

AVGO Revenue (TTM) data by YCharts

By 2028, Broadcom will have completed its transformation into an AI chip company, which could lead to a soaring stock price, as its revenue could triple over the next two and a half years. Currently, none of this existing growth is priced into Broadcom's stock, as it trades at 31 times forward earnings.

AVGO PE Ratio (Forward) data by YCharts

As a result, I think Broadcom is a genius buy now, as its stock will skyrocket from today's levels if management's projections pan out.

Keithen Drury has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.