With 2026 winding down, investors need to start thinking about which stocks will perform the best in 2027. In December and January, institutional investors do this and reposition their portfolios accordingly, and this can cause end-of-year and start-of-year rallies in stocks. That makes it smart to get in on these stocks before the rallies happen, so investors need to start considering what will be best next year now.
In 2026, shares of some of the best-performing artificial intelligence (AI) companies took a bit of a breather, and some others have done quite well, like memory chip stocks, hardware suppliers, and other infrastructure companies. Two that haven't done great are Nvidia (NVDA -2.27%) and Broadcom (AVGO -0.97%). Nvidia is up about 17%, beating the S&P 500 (^GSPC -0.58%), which is up about 11%. However, Nvidia investors are used to greater returns in one year. Broadcom investors are very disappointed, as the stock is up less than 5%, which puts it well behind the S&P 500.
Despite the poor 2026 performance, I think these two will have a phenomenal year in 2027 and are excellent stock picks now, as an end-of-year rally could be coming once the market realizes how mispriced these stocks are.
Image source: The Motley Fool.
Increased AI hyperscaler spending is coming next year
Investors have access to a lot of information, but what they don't have are multiyear spending projections from AI hyperscalers. This valuable piece of information could make or break Nvidia and Broadcom stocks, and fortunately, these two are releasing this information to investors. The AI hyperscalers don't wake up one day and decide they want billions of dollars in computing units. There are long-term, multiyear plans with spending projections, and the computing part of these figures is shared with Nvidia and Broadcom so they can plan to have the correct production capacity available.
NASDAQ: AVGO
Key Data Points
That gives Nvidia and Broadcom insider information, because those plans aren't publicly available. However, Nvidia and Broadcom have both divulged some of this information to investors.
During Nvidia's Q2 conference call, it told investors to expect 70% revenue growth in 2027, mainly powered by increased AI hyperscaler spending. The company also has the catalyst of its new next-generation Rubin architecture, which will boost the base price of the units in exchange for better performance.
NASDAQ: NVDA
Key Data Points
Broadcom's outlook was even more bullish, as it projects its AI semiconductor revenue will double in 2027 and again in 2028.
Those are strong projections, but none of that has been priced into either stock quite yet.
Nvidia and Broadcom looked prime to soar next year
One of the best ways investors can project what next year will look like for these two is to establish a reasonable trailing price-to-earnings (P/E) ratio, then look at how they are valued using next year's earnings projections.
NVDA PE Ratio data by YCharts
These two saw their valuations tumble in 2026, but their earnings have soared. I think 30 times earnings for each is reasonable for the long term, and it may even be a bit low. But that bakes some conservatism into the estimate. Now let's see what these two trade at if next year's earnings projections are used to value the stock.
NVDA PE Ratio (Forward 1y) data by YCharts
If both stocks hit their earnings forecasts and rise to 30 times trailing earnings by the end of the next fiscal year, that means there's more 50% upside in Broadcom's stock and more than 100% upside in Nvidia's. That makes these two no-brainer buys today and will easily rank them among the top-performing AI stocks next year.
