Broadcom has quietly become one of the biggest winners of the AI boom. Shares have soared over the past two years as demand for AI infrastructure exploded, and even after a recent pullback of more than 5% from November highs, the stock is still up over 50% this year.
That short-term dip raises an obvious question: Is Broadcom finally offering a better entry point, and can the stock keep climbing into 2026?
Key Points
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Broadcom’s custom ASIC chips complement NVIDIA and benefit from the shift toward hybrid AI data centers.
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Large, sticky customer deals are fueling growth. A $21 billion commitment from Anthropic underscores durable demand and long-term revenue visibility.
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Valuation is rich, but fundamentals are strong. Massive cash flow, rising dividends, and efficient growth could allow Broadcom to justify its premium price over time
How Broadcom Is Profiting From AI
When investors think about AI chips, NVIDIA usually dominates the conversation. GPUs remain essential for training large AI models, but Broadcom has built its AI strategy around a different niche: custom application-specific integrated circuits, or ASICs.
Unlike GPUs, ASICs are designed for specific workloads. That specialization delivers better energy efficiency and lower operating costs once AI models move from training to real-world deployment. Increasingly, hyperscalers are adopting hybrid data center designs, GPUs for training, ASICs for inference, rather than relying on one architecture.
This trend works in Broadcom’s favor. Its chips don’t replace GPUs; they complement them. That positioning gives Broadcom a long runway even as competition heats up elsewhere in the AI hardware market.
$21 Billion AI Commitment Most Investors Missed
One of the clearest validations of Broadcom’s strategy surfaced quietly last quarter. Management disclosed that Anthropic, the company behind the Claude AI model, was the previously unnamed customer that agreed to buy $10 billion worth of Broadcom chips. Even more telling, Anthropic followed up with an additional $11 billion in orders.
That level of commitment highlights a key advantage Broadcom has: deep integration. Custom silicon ties customers closely to Broadcom’s ecosystem, making switching suppliers costly and risky. This creates stickier, more predictable demand than most investors factor into their models.
A Growth Streak That Keeps Getting Longer
Broadcom’s operating performance continues to impress. The company has now delivered 50 consecutive quarters of revenue growth, expanding annual revenue from $28.5 billion in 2020 to roughly $69.3 billion over the trailing 12 months.
Fiscal Q4 was no exception. Revenue jumped 28% year over year to $18.0 billion, while profitability surged. Net income for fiscal 2025 rose nearly 300% to $23.1 billion, and free cash flow climbed 39% to $26.9 billion.
Guidance suggests momentum remains intact. Management expects fiscal Q1 revenue of $19.1 billion and sees earnings compounding at roughly 32% annually over the next three to five years.
Despite heavy AI investment, Broadcom is improving its balance sheet. Total debt declined from $66.3 billion to about $62 billion year over year, while cash nearly doubled to $16.2 billion.
In an industry where many AI-focused companies are consuming cash to stay competitive, Broadcom is generating it, and using that strength to increase flexibility and resilience.
Is Broadcom Expensive or Simply Exceptional?
At over $300 per share, Broadcom trades at premium valuations, roughly 70 times earnings and 26 times sales. With a market cap near $1.6 trillion, expectations are undeniably high.
Still, analysts remain bullish. The consensus price target implies more than 30% upside, and institutional buying has outweighed selling for over a year. Returns on equity and invested capital of about 32% and 17% suggest Broadcom isn’t just growing, it’s growing efficiently.
One overlooked aspect of Broadcom is its dividend record. The company has paid dividends since 2011 and recently announced its 15th consecutive annual increase, lifting the payout by 10% to $2.60 annually.
The yield may be modest, but the sustainability is notable. With nearly $27 billion in free cash flow, Broadcom has ample room to keep rewarding shareholders while investing in AI.
The Bottom Line
Broadcom isn’t a bargain-basement stock, and volatility is always possible if AI spending cools. But the company offers something rare: exposure to the AI boom through custom silicon, supported by massive cash generation, disciplined execution, and long-term customer commitments.
Even at elevated prices, Broadcom could remain a compelling long-term holding for investors looking to participate in the next phase of AI infrastructure growth.