The Nasdaq Composite (NASDAQINDEX: ^IXIC) has been driven to new heights as the ongoing bull market continues. In fact, each of the major market indexes hit a new all-time high on Monday, and experts believe there could be more to come. The potential for additional rate cuts, higher corporate earnings, and the ongoing migration of artificial intelligence (AI) are helping to fuel the market's relentless run. The Nasdaq has added 23% so far in 2025 (as of this writing), after climbing 29% in 2024 and 43% in 2023. This bodes well for next year, as history suggests the bull has room to run.
Specifically, over the past 50 years, there have been five bull markets that ran longer than three years. In each case, the market rose even further, according to data amassed by Ryan Detrick, chief market strategist at financial services company Carson Group. His research shows that bulls that stretched past their third anniversary continued to gain ground, lasting eight years on average, with the shortest lasting five years.
One of this year's biggest winners has been Broadcom (AVGO 2.23%). The stock is up 57% thus far in 2025 and has soared 110% over the past year. Despite growing like wildfire in recent years, there's reason to believe Broadcom's impressive run will continue into 2026. Read on to find out why.
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Multiple growth drivers
Broadcom supplies a wide assortment of semiconductors, software, and security products to the broadband, mobile, cable, and data center industries, yet many investors continue to underestimate its reach. Indeed, management points out that "99% of all internet traffic crosses through some type of Broadcom technology," which helps illustrate its importance.
Broadcom's expansive reach gave the company a head start when generative AI went viral in early 2023, as many of its products are critical components of cloud computing and data centers, where most AI processing occurs.
The robust demand is expected to continue. Nvidia CEO Jensen Huang recently suggested that data center infrastructure spending will hit between $3 trillion and $4 trillion by 2030. That represents a massive opportunity for Broadcom with its wide range of data center prodcuts and, more importantly, its application-specific integrated circuits (ASICs). These specialized chips can be customized to specific tasks, making them a more energy-efficient alternative for AI workloads.
The numbers tell the tale
The results are compelling. For its fiscal 2025 third quarter (ended Aug. 3), Broadcom generated record revenue of $15.9 billion, which jumped 22% year over year, while its adjusted earnings per share (EPS) of $1.42 climbed 31%. Management pointed to surging demand for its ASICs custom AI accelerators as fueling the results. AI networking revenue soared 63% year over year to $5.2 billion. Perhaps more telling, Broadcom's backlog hit a record $110 billion, which is a bullish indicator of future revenue.
For the upcoming fourth quarter, Broadcom is guiding for revenue of $17.4 billion, which would represent an increase of 24% year over year, driving its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to 67% of revenue.
To close out last year, management forecast AI revenue of between $60 billion and $90 billion in fiscal 2027. When compared to the $12.2 billion in AI revenue it generated in fiscal 2024, that suggests growth of between 391% and 638% over the next few years. The recent addition of OpenAI as a new hyperscale customer -- and another, as yet unnamed prospect -- illustrates how Broadcom could reach those lofty projections.
Wall Street is equally bullish. Analysts' average price target is roughly $392 (as of this writing), which represents potential upside of 8% compared to Monday's closing price. Furthermore, of the 46 analysts who offered an opinion in October, 93% rate the stock a buy or strong buy, and none recommend selling.
However, Melius Research analyst Ben Reitzes is much more bullish than his Wall Street colleagues. Just this week, he increased his price target to $475, which represents potential upside for investors of 31%. He suggests that, thanks to current demand and growing momentum for its ASICs, Broadcom could experience "huge upside to its AI revenues with Alphabet and a host of partners who want a piece of this design expertise." He goes on to estimate that Broadcom could generate EPS of $20 per share within three years. For context, Broadcom delivered adjusted EPS of $4.87 for all of fiscal 2024. If Reitzes is right, the upside for Broadcom investors is enormous.
NASDAQ: AVGO
Key Data Points
Time to buy?
One consequence of the recent price surge is Broadcom's valuation. The stock currently trades for about 39 times next year's earnings, suggesting a premium valuation -- but that fails to account for the company's accelerating growth. However, using the more appropriate price/earnings-to-growth (PEG) ratio, its multiple clocks in at 0.4, when any number less than 1 is the standard for an undervalued stock.
Furthermore, Broadcom has outperformed the broader market by a wide margin over the past five years, delivering gains of 924% (as of this writing), compared to 103% gains for the S&P 500 and 108% for the Nasdaq. This helps illustrate why Broad is deserving of a premium valuation and why the stock is a buy.
