In her Big Ideas 2026 report, fund manager Cathie Wood of Ark Invest (ARKK 4.03%) predicted that annual data center capital expenditures (capex) would go from around $500 billion in 2025 to $1.4 trillion in 2030. If that happens, one of the best stocks to invest in will be Broadcom (AVGO 0.40%).
The ASIC king
Owners of large artificial intelligence (AI) data centers (hyperscalers) are increasingly seeking cheaper alternatives to Nvidia's (NVDA 1.20%) graphics processing units (GPUs), which are the main chips powering AI workloads. Nvidia's chips are expensive, and companies generally don't want to be beholden to one semiconductor vendor. As such, hyperscalers have begun designing their own custom AI ASICs (application-specific integrated circuits) to handle some of their AI workloads, especially for inference, which is an ongoing cost.
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At the same time, these hyperscalers are turning to Broadcom for help. Broadcom is a leader in ASIC technology, providing the building blocks of chip design through its intellectual property portfolio and helping companies turn their designs into physical chips that can be manufactured at scale. It also has a good relationship with foundry leader Taiwan Semiconductor Manufacturing, helping it secure manufacturing capacity in a tight market.
Broadcom helped Alphabet (GOOGL 0.10%) (GOOG 0.23%) with its highly successful Tensor Processing Units (TPUs), and continues to benefit from the ramp-up of these chips. Alphabet is even beginning to let Google Cloud customers deploy its TPUs, and Broadcom has a $21 billion TPU order from Anthropic that it will deliver this year. Meanwhile, it is helping several other companies design their own custom AI ASICs, including OpenAI.
The company has predicted its three customers furthest along in their chip designs could be a $60 billion to $90 billion opportunity in its fiscal 2027. The company only produced just under $64 billion in total fiscal 2025 revenue, so these three customers alone could help double its revenue in two years.
NASDAQ: AVGO
Key Data Points
Meanwhile, Citigroup analysts have predicted that Broadcom's AI revenue could surge from around $20 billion this past fiscal year to $100 billion in fiscal 2027. Notably, this does not include any contributions from Apple, which is also reportedly working with Broadcom to develop its own custom AI chips.
With AI infrastructure spending expected to continue to soar over the next several years, Broadcom is one of the best-positioned companies to benefit. As such, this makes it a top AI stock to buy for this year and beyond.
