Broadcom's AI Supercycle Momentum: Is This the Next Buy-and-Hold Opportunity?

The global artificial intelligence (AI) infrastructure market is entering a new phase of hypergrowth, driven by the insatiable demand for specialized semiconductors and networking solutions. At the forefront of this transformation stands Broadcom Inc. (NASDAQ: AVGO), a company that has seamlessly pivoted from a traditional semiconductor player to a dominant force in AI-driven infrastructure. With its recent financial results and strategic positioning, the question arises: Is Broadcom’s current momentum a fleeting surge or the foundation for a long-term buy-and-hold opportunity?

AI Infrastructure Leadership: A Strategic Edge

Broadcom’s ascent in the AI semiconductor market is underpinned by its dual focus on custom AI accelerators and high-performance networking solutions. In Q2 FY 2025, the company reported record revenue of $15.0 billion, with AI semiconductor revenue surging 46% year-on-year to $4.4 billion, driven by demand for Ethernet-based Tomahawk switches and co-packaged silicon photonics [1]. This growth accelerated in Q3, with AI semiconductor revenue reaching $5.2 billion—a 63% year-on-year increase [2].

A pivotal development has been Broadcom’s expansion into hyperscaler partnerships. The company secured a $10 billion contract with a fourth major customer—widely speculated to be OpenAI—for its custom AI accelerators (XPUs), adding to existing relationships with Google and Meta [3]. This diversification of clients not only stabilizes revenue but also positions Broadcom to capitalize on the hyperscalers’ multi-year AI infrastructure roadmaps.

Technologically, Broadcom’s Tomahawk 6 and Tomahawk Ultra chips offer unparalleled scalability, enabling AI clusters to link up to 1,024 accelerators in a single rack—a critical advantage over competitors like NVIDIA [4]. Furthermore, its focus on AI inference—where power efficiency and performance are paramount—aligns with the growing shift from training to deployment in AI applications [5].

Valuation Resilience Amid Growth Premiums

Broadcom’s valuation metrics, however, raise questions about sustainability. As of September 2025, its trailing P/E ratio ranges between 110 and 125, significantly exceeding its 10-year historical average of 49.86 [6]. The PEG ratio, at 1.39–2.11, suggests the stock is trading at a premium relative to earnings growth expectations [7]. Such multiples are not uncommon for high-growth tech stocks, but they demand rigorous scrutiny.

The company’s financials, however, justify much of this premium. Adjusted EBITDA in Q3 2025 hit $10.7 billion, with margins holding steady at 66% [2]. Analysts from Goldman Sachs and BofA Securities have raised price targets to $365 and $400, respectively, based on 37x–40x P/E multiples for 2026 earnings [8]. These projections assume continued AI revenue growth, with management guiding for AI semiconductor revenue to reach $6.2 billion in Q4 2025 and $12 billion annually by 2027 [3].

The VMware acquisition has further bolstered Broadcom’s infrastructure software segment, which grew 43% year-on-year to $6.79 billion in Q3 2025 [2]. This diversification into software—a sector with higher margins and recurring revenue—adds a layer of resilience to the company’s business model.

Risks and Realities

While Broadcom’s trajectory is compelling, risks persist. The AI chip market is becoming increasingly competitive, with NVIDIA maintaining its lead in training chips and hyperscalers like Amazon and Google developing in-house solutions [9]. Additionally, the high P/E ratio leaves the stock vulnerable to earnings shortfalls or slowing AI adoption.

However, Broadcom’s technological differentiation—particularly in networking and inference—provides a moat. Its Tomahawk switches and co-packaged photonics are not easily replicated, and the $10 billion OpenAI deal underscores the value of its custom silicon [10]. Analysts project revenue could grow from $60 billion in the last twelve months to over $105 billion by 2028, with adjusted EPS nearly doubling to $12 [1].

Conclusion: A Buy-and-Hold Case?

Broadcom’s AI supercycle momentum is underpinned by leadership in critical infrastructure, robust financial performance, and strategic diversification. While its valuation appears stretched by historical standards, the company’s ability to sustain high-margin growth in a rapidly expanding market justifies the premium. For investors with a long-term horizon, Broadcom offers a rare combination of innovation and profitability—a hallmark of enduring tech champions.

Source:
[1] Broadcom Inc. Announces Second Quarter Fiscal Year 2025 [https://investors.broadcom.com/news-releases/news-release-details/broadcom-inc-announces-second-quarter-fiscal-year-2025-financial]
[2] Is Broadcom the No. 1 AI Stock to Buy Now? [https://247wallst.com/investing/2025/09/05/is-broadcom-the-no-1-ai-stock-to-buy-now/]
[3] Broadcom Stock's Path To 2x Growth [https://www.trefis.com/investing/articles/574409/broadcom-stocks-path-to-2x-growth/2025-09-06]
[4] Cloud Stocks: Broadcom Chipping Away at NVIDIA's Market [https://www.sramanamitra.com/2025/09/05/cloud-stocks-broadcom-chipping-away-at-nvidias-market/]
[5] AVGO (Broadcom) PE Ratio (TTM) [https://www.gurufocus.com/term/pettm/AVGO]
[6] Company of the Week - Broadcom Inc. (04.09.2025) [https://www.xtb.com/int/market-analysis/news-and-research/company-of-the-week-broadcom-inc-04-09-2025]
[7] Broadcom (AVGO) Peg Ratio (TTM) [https://www.zacks.com/stock/chart/AVGO/fundamental/peg-ratio-ttm]
[8] BofA Securities Raises Broadcom Stock Price Target to $400 [https://uk.investing.com/news/analyst-ratings/bofa-securities-raises-broadcom-stock-price-target-to-400-on-ai-growth-93CH-4251585]
[9] 2025 Semiconductor Outlook: Investor Roadmap [https://www.vaneck.com/corp/en/news-and-insights/blogs/thematic-investing/2025-semiconductor-outlook-investor-roadmap/]
[10] Broadcom Rallies on Report That OpenAI Is the New Key Customer [https://sherwood.news/markets/broadcom-builds-post-earnings-momentum-report-openai-new-customer/]