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Broadcom's Latest Prediction Makes the Stock a No-Brainer Buy Right Now

Source The Motley Fool

Key Points

Broadcom expects to reap $230 billion in AI semiconductor revenue during fiscal 2028.
The stock is priced pretty cheaply for how rapidly the business is growing.
10 stocks we like better than Broadcom ›

Broadcom's (NASDAQ: AVGO) management team are no strangers to making bold predictions. For some time, the company was guiding for $100 billion in AI semiconductor sales in its fiscal 2027. Considering that its artificial intelligence (AI) semiconductor revenue was $16.7 billion in Q3 of its fiscal 2026, or about $67 billion annualized, that forecast may have looked fairly ambitious.

However, Broadcom recently made even bolder predictions for both its fiscal 2027 and 2028, and they have major implications for the stock.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Image source: Getty Images.

Broadcom's latest guidance indicates huge growth

Not only did Broadcom bump its guidance for fiscal 2027, but it also issued estimates for fiscal 2028. In fiscal 2028, it expects to generate $230 billion in AI semiconductor revenue, another double from fiscal 2027's new $115 billion estimate. Perhaps even more important is that Broadcom said it has secured the supply chain to make this growth happen.

Having both demand and product availability to meet it will remain key to capturing processor market share as the AI boom progresses, as several chip designers are maxed out in terms of the production capacity they can access. This is a major win for Broadcom investors, and it's easy to see why.

Broadcom is taking a different approach to the AI computing industry. Instead of offering broad-purpose computing units like GPUs, it designs specialized hardware to serve narrower needs for a select few customers. Its largest clients include Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Anthropic, and OpenAI. All of these companies have partnered with Broadcom to develop application-specific integrated chips (ASICs) -- custom AI chips purpose-built for the exact workloads they'll see -- and all are seeing incredible results so far from these partnerships. As a result, they are all expanding their spending with Broadcom to maximize computing efficiency in their data centers.

This is clearly having a major effect on Broadcom's business, but the market isn't giving the chip designer much credit for that.

Broadcom trades for a very attractive 19 times next year's expected earnings.

AVGO PE Ratio (Forward 1y) Chart

AVGO PE Ratio (Forward 1y) data by YCharts.

That's a great price to pay as-is, and doesn't even factor in that its AI semiconductor revenue is expected to double again in its fiscal 2028.

All of that added up makes Broadcom stock one of the best AI computing investments right now. Broadcom has strong growth prospects and trades at a reasonable price. With products designed to improve the efficiency of AI computing, I think it's more likely to succeed over the next few years.

Should you buy stock in Broadcom right now?

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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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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