Shares of Broadcom (AVGO 1.11%) surged in 2025, gaining 49% for the year. Like many of its peers in the semiconductor and technology spaces, the company has become a key player in the growing adoption of artificial intelligence (AI). It is widely regarded as an industry leader in custom Application-Specific Integrated Circuits (ASICs), which are crucial to the success of high-speed computing, hyperscale data center operations, and the proliferation of AI.
Let's take a look back at what drove Broadcom's success in 2025 and why its winning streak will likely continue.
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Robust growth
Power consumption has become a growing concern in AI circles, and companies deploying the technology are looking for ways to reduce costs. Graphics processing units (GPUs) provide the necessary computational horsepower, but there's a trade-off, as these high-end chips are power-hungry.
Those seeking to conserve energy are increasingly turning to Broadcom's ASICs to meet that need, which is evident in the company's financial results. Last year, Broadcom's revenue grew 24% year over year to a record $64 billion, but that tells only part of the story. AI revenue surged 65% to $20 billion, fueling record semiconductor revenue.
That growth streak will likely continue. On the fourth-quarter earnings call, Broadcom CEO Hock Tan laid out expectations for the coming year, stating, "We see the spending momentum by our customers for AI continuing to accelerate in 2026." To that end, the company is guiding for first quarter revenue growth of 28%, fueled by AI semiconductor revenue, which is expected to grow roughly 100%.
Add to that Broadcom's $73 billion backlog, and the growing opportunity begins to come into focus.
NASDAQ: AVGO
Key Data Points
The road ahead
Looking further ahead, Tan previously stated Broadcom's AI opportunity was between $60 billion and $90 billion by 2027 -- and that estimate only included the company's three existing hyperscale customers, widely believed to be Alphabet, Meta Platforms, and TikTok parent ByteDance.
Since then, AI start-up Anthropic has placed a $10 billion order, and Broadcom has inked a multi-billion-dollar, four-year deal to provide 10 gigawatts of its custom ASICs to OpenAI. These new agreements suggest the company's previous long-term outlook might be conservative.
In fact, analysts' consensus estimates predict that Broadcom's revenue growth will increase by 52% in 2026 and by another 37% in 2027. Wall Street's average price target for the stock is $457, suggesting potential upside of 33% for investors over the coming year compared to Monday's closing price.
There's been some concern about a bubble in AI stocks, but the majority of investors plan to stay the course in 2026, according to The Motley Fool's 2026 AI Investor Outlook Report. The report found that nine of 10 AI investors plan to hold or even buy more AI stocks over the coming year, "This suggests that individual investors are buying into AI's potential for long-term growth even amid short-term volatility," according to the report. As such, Broadcom is well-positioned to benefit from those tailwinds.
Moreover, Broadcom stock is trading for less than 25 times next year's expected earnings, which is an attractive price for a company with such a compelling opportunity ahead.
