Broadcom Inc. AVGO is a critical high-tech AI picks-and-shovels stock in the exclusive $1 trillion+ market-cap club.
Broadcom’s custom AI chips are gaining steam since they can handle workloads similar to Nvidia's GPUs and could transform the industry. This backdrop is set to help AVGO more than double its earnings and revenue between FY25 and FY27 (after already doing so between FY21 and FY25).
The AI chip stock outclimbed Nvidia over the last year, up roughly 80%, as part of a ~12,900% surge in the past 15 years to crush Tech’s ~ 875% and its highly-ranked industry's ~1,600%.
Despite its run to new all-time highs, its average Zacks price target offers 12% upside, and it trades at a 40% discount to its highs at 31X forward 12-month earnings. The company is also a cash cow that pays a dividend.
Now might be the time for investors to consider buying Broadcom stock heading into its Q2 FY26 earnings report on June 3 and holding it for long-term AI upside.
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Broadcom : A Top Buy-and-Hold AI Stock
Broadcom’s semiconductor solutions are critical components across telecommunication equipment, smartphones, AI data centers, and beyond. AVGO also provides enterprise software, including cybersecurity, hybrid cloud infrastructure, and more, serving a wide-ranging customer base.
Most importantly on the AI front, Broadcom has transformed into a leader in networking processors that manage connections between data-center components, including Nvidia’s NVDA AI-focused chip clusters. On top of that, Broadcom is working directly with tech giants such as Meta META to help design their application-specific integrated circuits (ASICs).
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AVGO’s custom AI chips are gaining momentum since they can handle workloads similar to NVDA’s GPUs and could transform the industry. Broadcom is helping hyperscalers like Meta and Microsoft diversify away from Nvidia’s GPUs via their own custom-made AI chips.
Broadcom’s rise to AI infrastructure and high-tech picks-and-shovels giant is staggering. The $2 trillion market cap firm is one of just a handful of companies that stands to win the AI race, no matter which forward-facing AI companies come out on top, alongside the likes of Taiwan Semi TSM and several other behind-the-scenes titans.
It easily doubled its GAAP earnings and its revenue between FY21 and FY25. Broadcom grew its total Q1 FY26 AI revenue by 106%, “driven by robust demand for custom AI accelerators and AI networking.”
AVGO is projected to post staggering revenue growth during the next few years, with it set to expand its sales by 59% in FY26 and another 50% in FY27 to reach ~$154 billion, easily doubling FY25’s ~ $64 billion.
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The AI chip company is projected to expand its adjusted earnings by 67% in FY26 and 56% next to climb from $6.82 a share last year to $17.95 in FY27. The chart above highlights its impressive long-term earnings growth outlook, which has continued to improve rapidly.
Buy the AI Tech Stock Now for Growth, Value, and Upside
Broadcom expanded its free cash flow from $1.8 billion in FY15 to $26.9 billion in FY25, boosted by 100% growth since 2021.
The firm expanded its free cash flow by 33% YoY in the first quarter of FY26. It also has a sturdy balance sheet that should help AVGO continue to adapt and grow through key acquisitions and beyond.
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AVGO shares have jumped 82% in the past 12 months to outpace Nvidia’s 55%. This is part of 833% run the past five years to blow away Taiwan Semi’s 250% and Tech’s 122%. It has also easily outpaced TSMC over the last decade. The stock has soared ~12,900% in the past 15 years to crush Tech’s ~875% and blow away its highly-ranked Electronics – Semiconductors industry’s ~1,600%.
It touched fresh highs on Friday after landing support at its previous peaks from early December. The stock might face selling pressure after earnings, even if it provides strong guidance, simply due to the laws of market gravity. Of course, calling a near-term top is very hard as the bulls continue to press their foot on the gas.
Investors might want to take a starter position now before its Q2 FY26 report and then add to it the next time it pulls back.
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Despite some possible technical-based overheating, Broadcom’s average Zacks price target marks 12% upside from its current levels. It also trades at a 50% discount to its highs and 15% below its industry at 31.3X forward 12-month earnings.
Broadcom’s staggering earnings growth outlook has it trading right near its lowest ever price-to-earnings-to-growth (PEG) ratio at 0.64. This marks a 45% discount to its industry and its own 15-year median.
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NVIDIA Corporation (NVDA): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).