Can Broadcom Stock (AVGO) Deliver on AI Growth in 2026?

• Broadcom (NASDAQ:AVGO) is seeing a surge in AI-related revenue, with analysts forecasting it could double by 2027.
• The company's Q4 2025 results showed record $18.0 billion in revenue and $1.95 in earnings per share, driven largely by AI demand.
• Analysts at Wolfe Research upgraded the stock to 'Outperform' with a $400 price target, citing potential for 7 million tensor processing units (TPUs) shipped by 2028.
• Broadcom's AI ASIC backlog exceeds $73 billion, and it controls an estimated 60% of the AI server compute ASIC market by 2027.
• DCF analysis suggests the stock is currently overvalued at $320.33 per share, with an intrinsic value of $288.48.

In just a few months, the AI revolution has reshaped the semiconductor landscape—and Broadcom is positioned at the center of it. The company, long a leader in infrastructure software and networking silicon, is now a key supplier of AI chips to hyperscalers like Google and OpenAI. With Q4 2025 results showing record revenue and earnings, and analyst price targets rising to $400, investors are watching to see if the stock can justify its high valuation.

Does Avgo Stock (AVGO) Still Have Room to Run?

With AI demand surging and AI-related semiconductor revenue growing at an extraordinary pace, analysts are optimistic about Broadcom's long-term potential. The company reported AI chip revenue of $6.5 billion for the quarter and guidance of $8.2 billion for the next, nearly doubling year-over-year. These numbers point to a company that is not just keeping pace with the AI boom, but leading it.

Wolfe Research upgraded Broadcom to "Outperform," citing its pivotal role in Google's TPU program and potential to rival Nvidia in the AI chip market. The firm forecasts 7 million TPU shipments by 2028 and AI ASIC revenue of $78.4 billion in 2027. This growth trajectory is being driven by hyperscalers' increasing need for custom silicon to power large language models and AI workloads.

Still, investors should keep in mind that the stock is currently overvalued based on DCF and P/E analysis. Its price-to-earnings ratio of 65.67x far exceeds industry averages, and intrinsic value estimates place the fair value lower than the current share price. Whether this premium is justified depends on how well Broadcom can scale AI-related revenue without sacrificing margins.

What Is Driving Broadcom's AI Growth in 2026?

The biggest factor behind Broadcom's AI success is its role in supplying high-performance computing (HPC) silicon to data centers. In Q4 2025, semiconductor revenue grew 35% year-over-year to $11.1 billion, largely due to AI-driven demand. Management expects this trend to continue, with AI semiconductor revenue projected to reach $8.2 billion in Q1 2026.

Broadcom's XPU business—which includes CPUs, GPUs, and accelerators—now accounts for 65% of its AI revenue. The company has also expanded into custom chip design for OpenAI, adding to its list of high-profile clients. These partnerships are not just symbolic; they represent real infrastructure spending by companies building out AI capabilities at scale.

What sets Broadcom apart is its ability to capture recurring revenue through the AI stack. By supplying the silicon that powers AI training and inference, it's positioning itself as the "toll collector" in the AI infrastructure economy. This model could prove sustainable, but it also exposes the company to risks such as margin compression and competition from other chipmakers.

Should You Buy Avgo Stock (AVGO) at This Price Point?

While the long-term outlook for AI infrastructure is positive, investors should carefully assess whether the stock's current valuation is justified. On one hand, the company is generating strong cash flow—$7.5 billion in free cash flow for Q4 2025 and $26.9 billion for the full year—and has raised its 2027 revenue forecast to $154.5 billion. On the other hand, the stock is trading at a premium to both industry and peer averages, which could make it vulnerable to profit-taking or a slowdown in AI adoption.

Analysts at Morgan Stanley note that Broadcom could outperform once uncertainties around competition, margins, and valuation are resolved. The firm highlights the importance of gross margin stability in new rack opportunities and the potential for improved visibility on customer demand. If management can deliver on these metrics, the stock may justify its current premium.

Ultimately, whether to buy Avgo stock (AVGO) at this price depends on your risk tolerance and time horizon. If you believe in the long-term trajectory of AI infrastructure and are comfortable with a high multiple, the stock could still offer strong returns. However, if you're looking for a more conservative entry point, you may want to wait for a potential pullback or improved clarity on AI demand.

What to Watch in the Coming Months

Looking ahead, investors should keep an eye on a few key developments. First, TPU shipment growth and the extent to which Google and other hyperscalers continue to rely on Broadcom for custom silicon will be important indicators of the company's competitive position.

Second, margin stability in new AI-related ventures—especially rack sales and data center expansion—will be critical. If gross margins hold up or even improve, it could justify the premium valuation. But if margins compress due to increased competition or higher production costs, it could hurt investor sentiment.

Finally, broader macroeconomic factors such as interest rates and global semiconductor demand could influence the stock's performance. While AI spending is expected to continue growing, any slowdown in overall tech spending could pressure the sector.

At the end of the day, Broadcom is in a strong position to benefit from the AI boom—but like all high-growth stocks, it comes with risks. As investors watch the company's next moves, they'll need to balance optimism with caution.