Broadcom (AVGO -1.25%) has been a great investment in 2026. The stock has risen over 20% so far, easily outperforming the broader market.
However, I think this is just the beginning for Broadcom. If you look ahead to what's coming in 2027, I think it's pretty clear that Broadcom is due to have a tremendous year, and that the market hasn't fully grasped what's coming.
As a result, I think it's well worth considering buying before 2026 is over.
Image source: The Motley Fool.
Broadcom has a major catalyst arriving in 2027
Broadcom has grown to become one of the world's largest companies by market capitalization due to its sprawling business. However, there's one primary business that most investors are focused on: custom AI chips. Instead of competing against the graphics processing unit (GPU) makers head-on, it's taking a different path to the AI computing game.
It has partnered with several AI hyperscalers to design custom AI chips that are tailored to their workloads to optimize performance. This often allows custom AI chips to deliver superior cost performance versus GPU-based training. As a result, many hyperscalers are partnering with Broadcom to produce a custom AI chip, and those orders are due to hit in 2027.
NASDAQ: AVGO
Key Data Points
In the second quarter, Broadcom's AI semiconductor division grew at an impressive 143% pace to $10.8 billion. For 2027, Broadcom expects this division to generate at least $100 billion in revenue. That's major growth from today's level, and would make Broadcom a solid stock to buy now in anticipation of this growth.
But has this growth already been priced into Broadcom's stock? Not really.
AVGO PE Ratio (Forward) data by YCharts.
Broadcom trades for 36 times forward earnings, but that's only for fiscal 2026 estimates. If you use fiscal 2027 earnings, then it's valued at less than 22 times forward earnings. Considering that Broadcom's custom AI chips are growing in popularity, I wouldn't be surprised if it exceeds next year's estimates, as it's hard to project that level of growth accurately into the future. Furthermore, there could be additional growth and strength in 2028 that will also boost the stock over the next few years.
I think Broadcom is a great stock to load up on at a reasonable price. It has a lot of momentum in its business. If its products can deliver similar performance at a cheaper cost than GPUs, then there is a far larger market opportunity to steal. Broadcom could become one of the biggest winners in the later stages of the AI build-out.
