Key Points
Artificial intelligence (AI) infrastructure spending has been growing at an incredible pace, and the good news is that major hyperscalers, AI companies, and neocloud specialists are expected to continue investing more money in this space.
Nvidia recently noted that the combined capital expenditure of the top five hyperscalers is poised to reach $800 billion in 2026. The semiconductor specialist added that their capex could jump to $1.3 trillion in 2027. Importantly, Nvidia estimates that overall AI capex could jump to $3 trillion to $4 trillion by 2030.
Semiconductor stocks are winning big from the booming AI infrastructure spending. This explains why the PHLX Semiconductor Sector index has zoomed higher by 97% over the past year. However, Broadcom (NASDAQ:AVGO) stock has underperformed the semiconductor sector during this period, with a flat performance.
The company’s latest quarterly report hasn’t done much to improve confidence in the stock either. However, a closer look at Broadcom’s impressive growth suggests that investors may be missing the bigger picture.
Broadcom’s stellar results and guidance don’t justify the stock’s underperformance
Broadcom makes application-specific integrated circuits (ASICs) and networking components. These products are in terrific demand in AI data centers, which explains why the company reported phenomenal growth last quarter.
Broadcom released fiscal 2026 third-quarter results (for the three months ended Aug. 2) on Sept. 2. Its revenue jumped 86% year over year to $29.6 billion, driven by robust demand for custom AI chips and networking processors. What’s more, the company’s non-GAAP earnings nearly doubled year over year to $3.32.
Broadcom noted that its AI chip revenue jumped by a whopping 221% year over year in fiscal Q3 to $16.7 billion. The company anticipates a stronger year-over-year increase of 236% in AI revenue this quarter to $21.7 billion. As a result, Broadcom’s overall revenue is on track to increase by 93% in fiscal Q4 to $34.8 billion.
There is no doubt that Broadcom’s numbers and guidance are impressive. However, Wall Street expected Broadcom to guide for $35.1 billion in fiscal Q4 revenue. This explains why Broadcom stock was in the red following its stellar quarterly report. However, Broadcom’s underperformance means savvy investors can now buy the stock at a very attractive valuation, which could be a smart move given its terrific prospects.
In fact, Broadcom looks like an ideal investment for anyone looking to build a million-dollar portfolio in the long run. The stock’s cheap valuation and solid earnings growth potential point to significant long-term gains.
The stock is primed for a massive jump
Wall Street hasn’t given Broadcom enough credit for its outstanding growth, especially given its ability to sustain healthy momentum in the long run. The company generated $35.9 billion in AI revenue in the first nine months of fiscal 2026. Its fiscal Q4 guidance suggests that Broadcom’s AI revenue will reach $57.6 billion this year, up by 186% from last year.
Even better, Broadcom estimates that its AI revenue will double in fiscal 2027 to $115 billion, then jump again in fiscal 2028 to $230 billion. Broadcom management remarked on the latestearnings callthat the company has secured enough supply to meet its fiscal 2028 outlook. Additionally, the company is confident it will exceed $30.00 in earnings per share (EPS) in fiscal 2028.
For comparison, Broadcom’s earnings are anticipated to increase by 70% in fiscal 2026 to $11.64 per share. Importantly, analysts expect Broadcom to sustain rapid earnings growth over the next couple of years.
AVGO EPS Estimates for Current Fiscal Year data by YCharts
Assuming Broadcom achieves EPS of at least $30.00 in fiscal 2028 and trades at even 30 times earnings at that time, a discount to the tech-focused Nasdaq-100 index’s earnings multiple of 34, its stock price could reach $900 in just over two years. That’s a potential jump of 149% from current levels, which is precisely why I believe that Broadcom is an ideal fit for investors looking to buy a growth stock for their million-dollar portfolios.
Also, Broadcom trades at just 20 times forward earnings despite its phenomenal growth. So, investors are getting a great deal on this AI stock right now, and they should consider buying it hand over fist before it goes parabolic, given the red-hot growth it is poised to deliver.
Should you buy stock in Broadcom right now?
Before you buy stock in Broadcom, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $417,413!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,341,294!*
Now, it’s worth noting Stock Advisor’s total average return is 950% — a market-crushing outperformance compared to 210% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Nvidia. The Motley Fool has a disclosure policy.