Broadcom Inc.

🇺🇸NASDAQ Global Select
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Broadcom Inc. stock analysis AVGO overview
Somewhat Bullish +50

Is It Too Late to Buy Broadcom Stock?

📉 Broadcom stock fell nearly 15% at the start of 2026 but has since rallied to be up nearly 30% year-to-date.

📈 Looking back from 2025, the stock is up approximately 90%, leading investors to question if they missed the boat.

💰 Valuation metrics show Broadcom trading at 86 times trailing earnings and 39 times forward earnings, which are considered expensive.

🤖 The market's bullishness stems from custom AI chips that offer cost-effective alternatives to broad-purpose GPUs for hyperscalers.

🏢 Alphabet's Tensor Processing Unit (TPU) partnership with Broadcom has proven successful as a major hit for the company.

🚀 Several other AI hyperscalers are expected to launch custom chip designs in production throughout 2026 and 2027.

💵 CEO Hock Tan projects that by the end of 2027, custom AI chips will generate over $100 billion in revenue for Broadcom.

📊 The AI semiconductor division generated $8.4 billion in Q1 fiscal year 2026, ending February 1st.

📉 Revenue is expected to grow from about $64 billion in fiscal year 2025 to $159 billion by the end of 2027.

🔮 Analysts believe current expensive valuations are justified by this massive projected growth trajectory.

⚠️ If custom AI chip business exceeds projections, stock could have significant upside; if it fails, the stock is in a precarious spot.

📉 Much of the anticipated growth has already been priced into the current stock price.

🏆 The Motley Fool Stock Advisor team recently identified 10 best stocks to buy now, and Broadcom was not included on that list.

📈 Historical examples show Netflix and Nvidia were recommended by Stock Advisor in 2004 and 2005 respectively with massive subsequent returns.

📊 Stock Advisor's total average return is reported at 993%, significantly outperforming the S&P 500's 207% return.

⚖️ Keithen Drury has disclosed positions in both Alphabet and Broadcom, and The Motley Fool holds positions in these companies.

Bullish Signals
  • Broadcom stock is up nearly 30% year to date and around 90% since the start of 2025, demonstrating strong recent performance.
  • Custom AI chips are becoming more popular as cost-effective alternatives to GPUs, with major AI hyperscalers like Alphabet already deploying successful designs such as the Tensor Processing Unit (TPU).
  • Several other AI hyperscalers have custom chip designs entering production throughout 2026 and 2027, which is expected to significantly boost Broadcom's business.
  • Broadcom CEO Hock Tan projects that by the end of 2027, custom AI chips will generate more than $100 billion in revenue for the company.
  • The AI semiconductor division generated $8.4 billion in the first quarter of fiscal year 2026, showing major revenue growth compared to the $64 billion total revenue in fiscal year 2025.
  • Wall Street analysts expect Broadcom's revenue to reach $159 billion by the end of 2027, justifying its current valuation and suggesting potential upside if projections are exceeded.
  • Broadcom trades for 24 times 2027 earnings, which is considered a more reasonable price tag based on next year's growth projections.
Risk Factors
  • Broadcom trades at 86 times trailing earnings and 39 times forward earnings, which are described as 'incredibly expensive' measures.
Full Analysis
Broadcom (NASDAQ: AVGO) has experienced significant volatility, starting 2026 down nearly 15% before rising approximately 30% year-to-date, with a total gain of around 90% since 2025. The article analyzes whether the stock is still a viable investment despite its high valuation, which trades at 86 times trailing earnings and 39 times forward earnings. The primary driver for Broadcom's bullish outlook is its custom artificial intelligence chips, which offer cost-effective alternatives to broad-purpose GPUs for AI hyperscalers. Major partners like Alphabet have already adopted this technology with their Tensor Processing Units (TPUs), and several other designs are expected to enter production in 2026 and 2027. CEO Hock Tan projects that by the end of 2027, custom AI chips alone will generate over $100 billion in revenue, compared to $8.4 billion generated by the entire AI semiconductor division in the first quarter of fiscal year 2026. Analysts forecast total revenue growth from approximately $64 billion in fiscal year 2025 to $159 billion by the end of 2027, which would justify the current valuation on a forward basis of 24 times 2027 earnings. However, the article notes that much of this growth is already priced into the stock, meaning the investment carries risk if the custom chip business underperforms expectations. The piece concludes that while Broadcom remains a solid pick, it is not as undervalued as it was previously.