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Broadcom ( AVGO -2.75% ) just announced some simply incredible news: Its AI semiconductor revenue grew at a 221% pace to $16.7 billion during its latest fiscal quarter. That showcases both that the AI build-out is far from over and that Broadcom's computing units are gaining more traction. Yet the market's reaction to the quarterly report wasn't great, and the stock has been a dud in 2026.
After the post-earnings sell-off, it's barely in positive territory for the year. However, it's hard to ignore this growth rate. Investors should consider scooping up shares now, as I think Broadcom stock is a sleeping giant that could be awakened in the near future.
Image source: The Motley Fool. Broadcom's custom AI chips are gaining momentum While Broadcom does a lot of different things as a company, investors lately have been most focused on its custom chip design unit. Broadcom has partnered with several AI hyperscalers and frontier labs to design application-specific integrated circuits (ASICS) -- accelerator chips tailored for a narrow range of AI workloads.
Some of Broadcom's major clients are Anthropic, OpenAI, Alphabet ( GOOG +1.59% ) ( GOOGL +1.59% ) , and Meta Platforms ( META +3.01% ) . While Alphabet is its biggest client by far with its Tensor Processing Unit (TPU), the other three are starting to ramp up their orders as well, which led to Broadcom's strong growth rate in its fiscal 2026 third quarter (which ended Aug. 2). Premium Feature Moneyball Superscore 90 /100 Today's Change ( -2.75 %) $ -10.08 Current Price $ 357.16 Overall, Broadcom's revenue soared 86% and diluted earnings per share (EPS) rose by 96%.
For fiscal Q4, management expects revenue to rise by about 93% year over year to $34.8 billion. The average analyst expected Broadcom to guide for around $35 billion. However, Broadcom gave guidance for $29.4 billion in revenue for Q3 during its Q2 earnings, so it's not unreasonable to suspect it may be modestly underguiding this time too.
I think this sell-off has created a great entry point at which to scoop up shares, as Broadcom trades for a pretty attractive price, especially when its expected fiscal 2027 earnings are considered. AVGO PE Ratio (Forward) data by YCharts. A forward P/E of 32 seems like a fair price for Broadcom in its current state.
It trades for a mere 19 times next year's earnings, mainly due to the huge growth expected from its custom chip business. If it hits next year's growth estimates, its return to a 30 times forward earnings range next year could give the stock an upside of more than 50%. That's a pretty compelling investment case, making Broadcom a no-brainer buy right now.
Keithen Drury has positions in Alphabet, Broadcom, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy .
Source: The Motley Fool
