Broadcom (AVGO +1.37%) shareholders are having an OK year, with the stock up around 8%. That's still trailing the 10% return the S&P 500 (^GSPC +0.38%) is providing, so many investors would likely consider the stock a bust so far.
However, Broadcom is down more than 20% from its all-time high, and if it can return to those levels, it would easily crush the broader market's performance.
With artificial intelligence (AI) stocks looking a bit weak as of late, now could be the perfect time to buy Broadcom shares. Broadcom has an incredible future ahead of it, and investors aren't pricing the stock correctly.
Image source: The Motley Fool.
2027 will be a huge year for Broadcom
Broadcom is involved in several industries, but investors are most excited about its custom AI chips, known as ASICs (application-specific integrated circuits). ASICs are commonly used in multiple industries, but their use in AI applications is starting to ramp up. Broadcom already has one ASIC that's widely popular: Alphabet's Tensor Processing Unit (TPU).
TPUs can outperform graphics processing units (GPUs) in applications where the workload is properly configured, leading to better cost-effective AI training and inference. Alphabet has seen a ton of success with its TPUs, so it should come as no surprise to see others starting to do the same.
Broadcom has three other primary customers whose custom AI chips haven't quite reached full production capacity: Meta Platforms, Anthropic, and OpenAI. Production of their custom AI chips will start later this year and in 2027, leading to massive revenue growth for Broadcom.
NASDAQ: AVGO
Key Data Points
For fiscal year (FY) 2027 (ending October 2027), Broadcom expects its AI semiconductor division to do more than $100 billion in sales. For reference, Broadcom's total revenue during FY 2025 was $63.9 billion. For FY 2027, Wall Street analysts project $172 billion in revenue, growing 62% over FY 2026's figure.
That's a lot of growth in a short time frame, and it's the primary reason investors should consider buying Broadcom's stock on the dip. The stock may look a bit expensive from a trailing earnings standpoint, but when 2027 earnings are used to value the stock, it looks cheap.
AVGO PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
Broadcom is a multiyear investment, and investors must keep a long-term mindset with this stock. If you can do that, it's a great one to load up on right now, as a major growth catalyst is coming and could propel the stock to new heights.
