Why Broadcom (AVGO) Is a Must-Watch AI Infrastructure Play in 2026

The artificial intelligence (AI) revolution is accelerating, and semiconductor companies are at the heart of this transformation. Among them, Broadcom (NASDAQ:AVGO) stands out as a strategic leader in AI infrastructure, with a compelling mix of technological innovation, financial strength, and a robust pipeline of growth drivers. Recent developments-including a 15% price target increase from Goldman Sachs, multi-gigawatt AI chip deals with OpenAI, and a projected 100%+ year-over-year AI revenue growth-underscore why investors should closely watch this stock in 2026.

Strategic Positioning: Leading the AI Semiconductor Charge

Broadcom's dominance in AI infrastructure is anchored by its custom-designed AI accelerators (XPUs) and cutting-edge networking solutions. A pivotal moment came in October 2025, when Goldman Sachs analyst James Schneider raised his price target for AVGO to $380, a 15% increase from prior estimates, citing the company's partnership with OpenAI. This collaboration involves deploying 10 gigawatts (GW) of custom AI accelerators and networking products, with deployments starting in H2 2026 and concluding by 2029.

The significance of this deal cannot be overstated. OpenAI's reliance on Broadcom's silicon technology reinforces the latter's leadership in AI hardware, a sector expected to grow exponentially as demand for large-scale AI models intensifies. Moreover, the partnership includes co-development of systems using Broadcom's accelerators and Ethernet solutions, ensuring the company remains at the forefront of AI innovation.

AI Revenue Projections and XPU Scaling: A Catalyst for Growth

Goldman Sachs anticipates that Broadcom's AI revenue will grow at an extraordinary pace in fiscal 2026, with guidance likely to exceed 100% year-over-year. This growth is fueled by strong demand from major clients like Google and OpenAI, as well as the expansion of Broadcom's XPU business, which now accounts for 65% of AI revenue. A recent $10 billion order from a new fourth customer further validates the company's ability to scale its AI offerings.

The XPU business is not just a growth engine-it's a margin driver. As volumes increase in fiscal 2026, Broadcom's infrastructure innovations, such as the Tomahawk 6 switch and Jericho 4 Ethernet fabric router, will enable efficient scaling of AI infrastructure, addressing the technical challenges of large-scale deployments. These advancements position Broadcom to capture a disproportionate share of the AI semiconductor market, where margins are typically higher than in traditional chip segments.

Margin Expansion and Financial Strength: A Foundation for Long-Term Value

Broadcom's financials are equally compelling. In Q3 2025, the semiconductor segment achieved an operating margin of 57%, a testament to the company's pricing power and cost discipline. This margin expansion is expected to continue as AI demand drives higher utilization of Broadcom's advanced manufacturing capabilities.

Goldman Sachs' revised $380 price target reflects confidence in these fundamentals, with the firm emphasizing rising demand for custom chips and AI revenue growth as key drivers. The price target implies a 44% upside from current levels, a bold but justified call given Broadcom's diversified infrastructure play and strong balance sheet.

A Diversified Infrastructure Play with Long-Term Tailwinds

Beyond AI, Broadcom's portfolio spans data center networking, cloud infrastructure, and enterprise software, creating a moat against sector-specific risks. Its recent investments in Ethernet fabric routers and high-speed interconnects ensure it remains a critical supplier for hyperscalers and cloud providers, who are racing to build out AI-ready infrastructure.

This diversification, combined with a track record of disciplined M&A and R&D spending, positions Broadcom to navigate macroeconomic volatility while maintaining its growth trajectory. As AI adoption accelerates, the company's ability to deliver both high-performance hardware and scalable networking solutions will be a key differentiator.

Conclusion: A Buy for the Long-Term

Goldman Sachs' 15% price target increase and bullish outlook are a validation of Broadcom's strategic positioning in the AI era. With a multi-gigawatt deal with OpenAI, a projected 100%+ AI revenue growth, and a margin-expanding XPU business, AVGO is uniquely positioned to benefit from the AI infrastructure boom. For investors seeking exposure to the next phase of the semiconductor cycle, Broadcom offers a compelling combination of innovation, financial strength, and long-term growth potential.

[1] Goldman Sachs Reiterates Buy Rating on Broadcom ( ... [https://finance.yahoo.com/news/goldman-sachs-reiterates-buy-rating-144645942.html]
[3] Broadcom (AVGO) Q3 2025 Earnings [https://mlq.ai/stocks/AVGO/q3-2025-earnings/]
[4] Broadcom – An AI Powerhouse With 20%+ Growth and a 44 [https://rijnberkinvestinsights.substack.com/p/broadcom-an-ai-powerhouse-with-20]
[5] Broadcom And Chill - AI's Winning Trade For 2026 [https://seekingalpha.com/article/4844683-broadcom-and-chill-ais-winning-trade-for-2026-rating-upgrade]
[6] Broadcom Gets A 15% Price Target Bump From Goldman Sachs Ahead Of Earnings [https://stocktwits.com/news-articles/markets/equity/broadcom-gets-a-15-percent-price-target-bump-from-goldman-sachs-ahead-of-earnings/cL538TzREWQ]