Broadcom (AVGO), one of the world’s preeminent semiconductor companies, stands out as one of the most compelling opportunities in the stock market today. Despite its nearly $2 trillion valuation, the company still trades at a discount to its growth outlook, with upward-trending earnings revisions supporting a Zacks Rank #1 (Strong Buy) rating. At the same time, shares continue to exhibit strong price momentum, sitting just below record highs.
While Nvidia has established itself as the leader in general-purpose AI GPUs, Broadcom has emerged as the go-to developer of custom AI accelerators (XPUs) for hyperscalers building their own silicon. The company now counts six major customers, including Alphabet, Meta Platforms, and OpenAI.
This positioning is driving a sharp acceleration in growth. Broadcom’s AI-related revenue has expanded from roughly 15% of total sales just two years ago to approximately 44% today, with the segment growing 106% year-over-year in the most recent quarter. The company has also disclosed a $73 billion AI-specific order backlog, while management has outlined a path toward $100 billion in AI revenue by 2027.
Broadcom’s execution has been equally impressive over the long term. The stock has compounded at an annual rate of 39% over the past decade and gained more than 140% over the last 12 months alone. Below, we break down why this exceptional growth trajectory is likely to continue, and why shares can still be owned at a reasonable valuation, with additional upside catalysts ahead.
Image Source: Zacks Investment Research
As noted, Broadcom continues to deliver exceptional growth, particularly given its scale. Sales are projected to increase more than 60% this year and nearly 50% next year, while earnings are expected to climb 68% this year and 55% next year.
Despite this rapid expansion, the valuation remains reasonable. Shares trade at roughly 35x forward earnings, while long-term EPS growth is projected at 48.6% annually, resulting in a PEG ratio of just 0.72, suggesting the stock is still trading at a discount relative to its growth profile.
The company’s top Zacks Rank is supported by strong upward momentum in analyst sentiment. Earnings estimates have been revised higher across all timeframes, with current year projections rising nearly 14% over the past 60 days and next year estimates up nearly 25%. Notably, revisions have continued as recently as the past week, signaling that analysts remain increasingly bullish on the stock.
Image Source: Zacks Investment Research
