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Key Takeaways:
- Broadcom delivered record Q2 revenue of $15 billion, up 20% year-over-year, with AI semiconductor revenue surging 46% to $4.4 billion.
- AVGO expects AI semiconductor growth rates to sustain into fiscal 2026, driven by accelerating inference demand and XPU deployments.
- Management forecasts AI revenue could reach $60-90 billion by fiscal 2027, representing a potential 5x increase from current levels.
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Valued at a market capitalization of $1.17 trillion, Broadcom (AVGO) has emerged as one of the most compelling AI infrastructure plays in the semiconductor sector.
AVGO stock has delivered staggering returns of 1,823% over the past 10 years, transforming from a traditional connectivity company into a critical enabler of the artificial intelligence revolution.
With its unique positioning in custom AI accelerators and networking infrastructure, Broadcom stock appears poised for continued explosive growth that could potentially double its market value within the next three years.
Let’s examine the key factors that could drive Broadcom’s next phase of growth and whether AVGO stock can maintain its remarkable trajectory through 2028.
1. Broadcom is Bullish on AI Growth
Broadcom’s latest results revealed a fundamental shift in AI workloads that’s driving unprecedented demand for both custom silicon and networking infrastructure.
CEO Hock Tan highlighted that hyperscale customers are “doubling down on inference in order to monetize their platforms,” creating urgent demand that could accelerate XPU deployments into the back half of 2026.
Broadcom’s AI semiconductor revenue reached $4.4 billion in fiscal Q2, representing 46% year-over-year growth and marking the ninth consecutive quarter of substantial expansion.
More importantly, management expects this growth trajectory to sustain into fiscal 2026, with Q3 AI semiconductor revenue forecast at $5.1 billion, up 60% year-over-year.
This acceleration is being driven by the monetization imperative facing AI hyperscalers. As Tan explained, “These hyperscalers and those with LLMs need to justify all the spending they’re doing. Training makes your frontier models smarter… You want to monetize inference.”
This creates a powerful feedback loop where increased inference capacity drives demand for both custom accelerators and the networking infrastructure to connect them.
The inference boom is particularly beneficial for Broadcom’s networking business, which represented 40% of AI revenue in Q2.
Its Tomahawk switches, Jericho routers, and NICs are becoming increasingly critical as AI clusters scale to hundreds of thousands of accelerators, requiring seamless interconnection.
Broadcom’s newly announced Tomahawk 6 switch, featuring a capacity of 102.4 terabits per second, enables clusters of over 100,000 AI accelerators to be deployed in just two tiers instead of three, improving performance and reducing latency for next-generation AI workloads.
Check out Broadcom’s full analyst estimates and growth forecast (It’s free) >>>
2. AVGO Stock to Benefit From Product Differentiation
Broadcom’s custom AI accelerator business represents one of the most strategically important growth drivers in the semiconductor industry.
It is working with three hyperscale customers and four additional prospects to develop custom XPUs (processing units) that offer advantages over merchant silicon alternatives.
The value proposition of custom accelerators extends far beyond cost savings. This hardware-software co-optimization approach enables hyperscalers to achieve “way higher performance than you otherwise could” compared to using third-party merchant silicon.
The learning curve and optimization benefits compound over multiple development cycles, creating powerful competitive moats for both Broadcom and its customers.
Management continues to expect at least three customers to each deploy 1 million AI accelerator clusters by 2027, with a significant percentage utilizing custom XPUs.
This represents an enormous scaling opportunity, as current deployments are measured in tens of thousands rather than millions of accelerators per customer.
The custom approach also helps hyperscalers reduce their dependence on Nvidia’s premium-priced GPUs, which have profit margins exceeding 50%.
By working directly with Broadcom on custom silicon, these companies can achieve comparable performance while retaining more value within their own platforms.
3. A Focus the Networking Revolution
One of Broadcom’s most exciting growth vectors is the ongoing transformation of AI cluster architectures, particularly the shift toward scale-up networking configurations that require higher switch density and connectivity.
Traditional scale-out networking deployments are being complemented by scale-up architectures where GPU-to-GPU interconnects within data centers require much higher bandwidth and lower latency.
This architectural shift is driving increased adoption of Broadcom’s Ethernet-based networking solutions, which the company positions as the preferred choice for hyperscale customers over proprietary alternatives.
The scale-up opportunity is still in early stages, with most current interconnects using copper rather than optical connections. However, as cluster sizes grow beyond 72 GPU interconnects toward 128 or more, the transition to optical networking will create additional opportunities for Broadcom’s advanced switching and potentially co-packaged optics solutions.
Broadcom’s networking portfolio spans the entire AI infrastructure stack, from Tomahawk switches and Jericho routers to NICs and emerging optical solutions, positioning it to capture value across multiple networking layers as AI clusters continue scaling.
Valuation Setup for AVGO Stock
Despite the massive run-up in AVGO stock, its valuation remains compelling relative to its growth trajectory.
Management’s forecast of $60-90 billion in AI revenue by fiscal 2027 represents a potential 5x increase from current AI revenue levels of approximately $18 billion annually.
If Broadcom achieves the midpoint of its AI revenue guidance ($75 billion) while maintaining its current non-AI business of roughly $39 billion, total revenue would exceed $110 billion by fiscal 2027, up from $60 billion currently.
Broadcom’s strong cash generation and disciplined capital allocation provide additional support for valuation expansion. Free cash flow reached $6.4 billion in Q2, or 43% of revenue, allowing the chip maker to return $7 billion to shareholders through dividends and share repurchases.
Analysts tracking Broadcom stock expect its sales to rise from $51.57 billion in fiscal 2024 to $112 billion in fiscal 2028, an annual increase of 21.4%. Comparatively, adjusted earnings are forecast to expand from $4.87 per share to $12.62 per share in this period.
AVGO stock currently trades at a forward price-to-earnings multiple of 34x, which is above its 10-year average multiple of 17x.
If Broadcom stock is priced at a multiple of 33x and reaches its projected $12.62 in normalized EPS, it will trade around $415/share in June 2028, indicating an upside potential of 66% from current levels.
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Average Analyst Price Target for AVGO Stock
Wall Street remains bullish on AVGO stock, with a consensus price target of $282/share. Analysts expect the stock to rise around 12% from current levels over the next 18 months.
Notably, AVGO stock currently has a high target price of $340 and a low target price of $210.
Of the 45 analysts tracking Broadcom stock, 38 recommend “Buys”, five recommend “Hold”, and two recommend “Sell.”
TIKR Takeaway for AVGO Stock
Broadcom’s transformation from a traditional semiconductor company to a critical AI infrastructure provider positions AVGO stock for continued outperformance over the next three years.
A unique combination of custom accelerator design capabilities and comprehensive networking portfolio creates multiple avenues for growth as AI deployments scale exponentially.
The potential for AI revenue to reach $60-90 billion by fiscal 2027, combined with stable cash flows from the broader business portfolio, suggests Broadcom could realistically achieve a $2 trillion market capitalization within three years, indicating significant upside from current levels.
While valuation multiples appear stretched in the near term, the massive scale of the AI infrastructure buildout and Broadcom’s differentiated positioning justify premium pricing for investors with a multi-year investment horizon focused on the ongoing digital transformation.
FAQs
1. What is the market cap of AVGO stock?
The market cap of AVGO stock is $1.17 trillion, as of June 23, 2025.
2. How much has AVGO stock returned in the last 10 years?
In the last 10 years, Broadcom stock has returned 1,820%.
3. What is the AVGO stock price target?
The average AVGO stock price target is $282.
4. Is Broadcom a China company?
No, Broadcom is a U.S.-based chip manufacturer.
5. Does Broadcom pay shareholders a dividend?
Yes, Broadcom pays shareholders an annual dividend of $2.37 per share.
6. Is AVGO stock a buy, sell, or hold?
Out of the 45 analysts covering AVGO stock, 38 recommend a “Buy”.
7. Is Broadcom stock undervalued or overvalued?
As of June 2025, Broadcom stock trades at an 12.20% discount to consensus price targets.
8. What is the P/E ratio for AVGO stock?
The forward P/E ratio for AVGO stock is around 34x.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
