Reaching a $1 trillion valuation isn't as exclusive as it once was, but the companies with a $3 trillion market cap aren't as big a group. There are only four members right now: Nvidia, Alphabet, Apple, and Microsoft. They are the who's who of big tech, and there's a reason they are so highly valued.
However, I think there could be another member of the $3 trillion club by the end of the year: Broadcom (AVGO 0.70%), which currently has a $1.7 trillion market cap. So, for it to join Nvidia and the three others, its stock needs to rise about 77% in 2026. That would be an incredible performance and would make it a must-own if it achieves that. But is it realistic?
Broadcom's side business is becoming its primary business
Broadcom does a lot of different things. Its products include mainframe software, wireless and wired connectivity, data storage, and virtual desktop software via its acquisition of VMware. This allowed it to make itself into a powerful conglomerate, but all of that could be displaced by its new business: custom AI accelerator chips.
Instead of offering a multipurpose chip like a graphics processing unit (GPU), Broadcom is working directly with some of the leaders in artificial intelligence (AI) to design chips that fit their needs. These are known as ASICs (for application-specific integrated circuits).
ASICs aren't anything new. They've been around for a long time and power many specific workloads. However, Broadcom is really the only one doing it for AI-focused hardware.
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Key Data Points
When a semiconductor is designed for the particular workload, it can unlock speed and efficiency not available from a broad-purpose chip. One of Broadcom's most successful custom AI chips is Google's tensor processing unit (TPU), which won't completely replace GPUs but can bolster an AI hyperscaler's overall computing strategy.
Several AI companies besides Alphabet currently use a Broadcom-designed chip or have one in its development stages, including OpenAI, the makers of ChatGPT. So the ASICs business is booming, and instead of being something that Broadcom does on the side, it's becoming its primary business.
In the fourth quarter of fiscal 2025 (ending Nov. 2), Broadcom's total revenue was $18 billion. The primary bright spot in that quarter was its AI semiconductor business, which grew 74% year over year to $6.5 billion, which was about a third of Broadcom's total revenue.
And management believes that its AI semiconductor business will increase to $8.2 billion of the $19.1 billion projected total in the first quarter of 2026. That growth is expected to persist throughout the year and become the company's largest business segment.
Broadcom will need a bit of help to get to $3 trillion
For fiscal 2026, Wall Street analysts project that it will grow revenue 51% and increase its earnings per share (EPS) to $10.14, up from $6.82 in fiscal 2025. That will be considered a successful year, but will it be enough to reach a $3 trillion market cap?
If Broadcom stock rises 77% from its current $352 price, it would be $623 per share. If it generates the $10.14 in EPS as expected, it would trade for 61 times trailing earnings.
That's not cheap, but its shares already trade for 74 times trailing earnings. So, if the company hits analysts' earnings estimates and its valuation decreases just a bit, Broadcom could be a $3 trillion company by the end of 2026. It won't be easy, but I think it's entirely doable. And even if it misses that mark, the upside is there for it to be a successful investment.
