The AI boom is supercharged Broadcom‘s (avgo) -2.90%)) With recent quarter growth, the company is currently earning a significant portion of its revenue by selling custom processors and selling networking chips deployed by the data center’s leading cloud service providers.
The stock has made a big move in the past few months, jumping an impressive 41% at the time of this writing, past its market capitalization of $1 trillion. The good part is that Broadcom is scratching the surface of major opportunities in the AI chip market, which could help us maintain solid growth in the future.
Of course, buying just Broadcom and hoping that will help you become a billionaire is not wise as the cracks in the company’s growth story can cause stocks to skyrocket. However, Broadcom appears to be the ideal choice for investors looking to build a diverse $1 million portfolio. Let’s see why.
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Broadcom’s AI revenue will be picked up
Broadcom released its second quarter results for 2025 (the three months ended May 4th) on June 5th. That revenue rose 20% year-on-year to $15 billion, while adjusted revenue rose at a 43% rate.
AI played a key role in fostering this robust growth. The company’s AI revenue rose to $4.4 billion, 46% year-on-year. That means they’re getting almost 30% of the top line by supplying chips that power this technology. What’s noteworthy here is that Broadcom is projecting further acceleration in AI revenue this quarter, with revenues of $5.1 billion. This is likely to be a 60% improvement from the same period last year.
Additionally, Broadcom CEO Hock Tan showed the company’s AI revenue growth trajectory is sustainable in its latest revenue conference call. Tan said the growth rate Broadcom has witnessed so far in 2025 “will likely continue.” That’s not surprising given that Broadcom is currently seeing stronger demand for custom AI chips (known as XPUs) for inference purposes.
Management says that despite the economic uncertainty created by the tariff war, three existing customers deploying custom chips in their data centers for AI training remain robust in their infrastructure investment plans. At the same time, these three customers are “doubling inference to monetize the platform,” so the company expects “to “accelerate XPU demand for the second half of 2026, meeting urgent demand in addition to the demand shown from training.”
A big reason why Broadcom should be able to maintain impressive AI revenue growth is due to the large addressable opportunities of $60 billion to $90 billion seen in AI chips in fiscal year 2027, based on the three customers currently serving. There is still a lot of space in this market, considering the company is generating $13.6 billion in revenue from AI chip sales in the first three quarters of the year.
That’s especially true given that four other hyperschools for manufacturing custom AI processors are in negotiation with Broadcom. As a result, Broadcom may be sitting in a much larger AI-related addressable market. This explains why analysts have raised expectations for growth for the company following the latest results.
Estimates of AVGO revenue for the current fiscal year Data based on data YCHARTS
Investors have traded quite a bit about this stock
Broadcom is trading with advance revenues of less than 38 times as of this writing, following a recent surge. It may seem expensive at first, but we have seen the company’s outstanding revenue growth justify its rich valuation. Another important thing worth noting is that Broadcom’s price/revenue and growth rate (PEG ratio) is just 0.66 based on its forecast revenue growth rate over the next five years, according to Yahoo! finance.
The PEG ratio is a positive valuation metric calculated by dividing a company’s price-to-return ratio by the estimated annual revenue growth rate over the next five years. Readings below 1 means that the stock in question is underestimated, and Broadcom’s multiples are well below that mark.
All this will be a solid growth stock for Broadcom to buy now. This is because it is built for long-term benefits and could positively contribute to a million-dollar portfolio.
