Broadcom’s (AVGO) rally has been massive, but I still believe the company remains one of the strongest long-term beneficiaries of the artificial intelligence (AI) infrastructure buildout. The stock’s rebound has been fueled by relentless AI demand, expanding hyperscaler partnerships, and growing confidence that the global technology leader has firmly established itself as the leading custom AI silicon player outside of Nvidia (NVDA).
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Trade NVDA with leverageWhile concerns about financing constraints and valuation are valid, especially after the stock’s 42% rally from its March lows, I remain bullish on Broadcom.
Broadcom Is Becoming the Backbone of Custom AI Infrastructure
Broadcom’s AI story has evolved far beyond networking chips. The company is now deeply embedded in the custom accelerator strategies of some of the world’s largest AI players, including Google (GOOG), Meta (META), Anthropic, and OpenAI. Management has already confirmed six AI customers, with expectations that these relationships alone could generate more than $100 billion in AI chip revenue by Fiscal 2027.
Importantly, this growth is no longer theoretical. Broadcom recently expanded its multi-year partnership with Meta to support multiple generations of Meta Training and Inference Accelerator (MTIA) custom AI chips through at least 2029. The initial deployment alone exceeds 1 gigawatt of compute capacity. Broadcom is also working with Google on next-generation tensor processing unit (TPU) systems and networking infrastructure through 2031.
Meanwhile, Anthropic’s AI expansion plans continue to scale aggressively, with expectations for more than 3.5 gigawatts of TPU-based AI compute capacity beginning in 2027. That level of long-term visibility is rare even in today’s AI market.
AI Demand Continues to Surprise to the Upside
Broadcom’s most recent earnings report reinforced just how powerful AI demand remains. First-quarter revenue reached $19.3 billion, slightly above expectations, while second-quarter guidance of roughly $22 billion is in line with consensus, representing a 47% year-over-year increase. AI semiconductor revenue alone is expected to hit $10.7 billion in the April quarter, well ahead of prior estimates.
Management also highlighted that visibility into fiscal 2027 has “dramatically improved,” supported by long-term supply agreements extending through 2028.
Another important development is margins. Previously, investors feared Broadcom’s AI ramp would pressure gross margins because of the lower profitability profile of custom application-specific integrated circuits (ASICs) relative to traditional networking products. Instead, management now expects semiconductor GAAP gross margins to remain roughly stable around 68%, helped by pricing power and scale efficiencies. That was a major positive surprise.
The Funding Issue Is Real
Still, the market is increasingly focusing on a different problem: funding. The sheer scale of AI infrastructure spending is becoming enormous. Gigawatt-scale AI data centers require tens of billions of dollars in financing, and chip companies are increasingly being pulled into those discussions.
Recent reports suggest Broadcom is involved in financing talks tied to OpenAI’s custom AI chip program, where the first phase alone could cost roughly $18 billion. Bloomberg also reported that Apollo Global Management (APO) and Blackstone (BX) are discussing approximately $35 billion in financing support connected to Broadcom’s AI chip development efforts. Broadcom itself acknowledged in prior disclosures that Anthropic deployments involve discussions with “operational and financial partners.” To me, this reflects both opportunity and risk.
On the one hand, the willingness of customers and financiers to commit such enormous sums underscores just how massive AI demand may become over the next decade. On the other hand, it highlights growing strain across the AI ecosystem, where scaling compute infrastructure increasingly depends on sophisticated financing arrangements. This does not break the bullish thesis for Broadcom, but it does add complexity.
Broadcom’s Business Model Is More Durable than Many Realize
One reason I remain bullish despite these concerns is Broadcom’s diversification. Unlike many AI-focused semiconductor companies, Broadcom is not dependent on a single segment. The company combines high-growth AI semiconductors with stable infrastructure software and traditional semiconductor businesses.
Management estimates that even as AI chip sales exceed $100 billion annually by Fiscal 2027, its software and non-AI semiconductor operations could still contribute roughly $50 billion in additional high-margin revenue. That matters because it gives Broadcom more resilience during periods of AI volatility.
The infrastructure software business, in particular, remains extremely sticky. Analysts have pushed back against fears that software growth may slow meaningfully, noting that Broadcom’s enterprise products remain deeply embedded within large organizations.
Valuation Looks Expensive — but the Growth Justifies It
Broadcom is not cheap on traditional metrics. The stock currently trades at a 12-month trailing P/E of roughly 81x, compared with a technology sector median closer to 37x. Its price-to-operating-cash-flow ratio of nearly 62x also sits dramatically above the sector average of 20x.
However, I think those premium multiples are justified given Broadcom’s position at the center of one of the most important technology spending cycles in decades. The company has unmatched exposure to custom AI accelerators, networking infrastructure, hyperscaler AI deployments, and increasingly software-driven AI monetization opportunities. Revenue visibility has improved materially, margins remain strong, and the AI opportunity may still be underestimated.
Even after the stock’s powerful rebound, I believe earnings growth can continue to support higher valuations over time.
Wall Street’s View
According to TipRanks, Broadcom carries a Strong Buy consensus rating, with 26 Buy, four Hold, and no Sell ratings. Based on 30 Wall Street analysts, the average price target is $473.74, implying roughly 7.72% upside from the latest price of $439.79.
Conclusion
Broadcom’s AI partnerships continue to expand at an impressive pace, reinforcing the company’s status as one of the most important infrastructure suppliers in the global AI race.
Yes, financing concerns around next-generation AI deployments are growing, and investors should not ignore the increasing capital intensity required to scale AI infrastructure. However, I view those challenges as a reflection of extraordinary demand rather than a sign that the AI cycle is breaking.
Broadcom continues to execute exceptionally well across AI compute, networking, and software, while maintaining strong margins and improving long-term visibility. That is why, even after the stock’s huge rally from the March lows, I remain bullish on AVGO.