The AI chip race has produced a handful of clear winners. Broadcom is considered one of them. However the query heading into its subsequent earnings report is not about whether or not it’s a high AI inventory to personal.
The true debate now could be: Can an organization already pulling in billions from synthetic intelligence continue to grow quick sufficient to justify its lofty valuation?
A minimum of one main Wall Street agency thinks the reply is sure, and it’s placing that view on document earlier than Broadcom studies subsequent month.
Why Broadcom is a high chip inventory
To know why Citi’s name carries weight, you first want to know what Broadcom (AVGO) does within the AI world.
Broadcom designs customized AI chips known as XPUs, quick for accelerator processing items, tailor-made particularly for every of its six main prospects. Assume Google, Meta, and now OpenAI.
These chips are constructed from the bottom as much as run every firm’s particular AI workloads much more effectively than off-the-shelf processors can.
Extra AI:
Past chips, Broadcom additionally provides the networking silicon that connects hundreds of those processors inside large AI information facilities.
That mixture makes Broadcom deeply embedded in how the world’s greatest expertise corporations construct their AI infrastructure.
In its fiscal first quarter of 2026 (led to January):
Whole revenue rose by 29% 12 months over 12 months to document $19.3 billion.
Semiconductor AI revenue greater than doubled 12 months over 12 months to $8.4 billion.
Adjusted earnings earlier than curiosity, taxes, depreciation, and amortization, or EBITDA, totaled $13.1 billion, indicating a margin of 68%.
These numbers replicate a enterprise that six of the world’s most essential expertise companies rely on to energy their AI ambitions.
Citi makes a transfer earlier than June 3 earnings
Citi analyst Atif Malik raised his value goal on Broadcom from $475 to $500 on Might 12, conserving his Purchase score in place and naming the inventory his high semiconductor choose for 2026.
Broadcom studies its fiscal second quarter outcomes on June 3, and Malik went on the document earlier than the announcement.
Malik estimates AI income will develop from roughly half of Broadcom’s whole gross sales at present to round 81% of the enterprise by late fiscal 2028.
“We now have line of sight to realize AI income from chips, simply chips, in extra of $100 billion in 2027. We now have additionally secured the supply chain required to realize this.”
So the ambition just isn’t analyst speculation layered atop cautious steering. It’s directionally according to what administration is already saying publicly.
For the present quarter ending in April 2026, Wall Road’s common income estimate stands at $22.08 billion, in response to Yahoo Finance. That might symbolize roughly 47% progress from the identical interval a 12 months earlier.
Comparatively, adjusted earnings are projected to develop from $1.58 per share to $2.39 per share.
For the complete fiscal 12 months 2026, the typical revenue estimate sits at $103.27 billion. Subsequent 12 months, the typical jumps to $158.86 billion, although estimates range broadly, from $90.65 billion to $197.41 billion, reflecting the uncertainty that also surrounds the tempo of AI infrastructure spending.
Hock Tan, CEO of Broadcom expects AI gross sales to accelerateNurPhoto/Getty Pictures)
Is AVGO inventory nonetheless undervalued?
Valued at a market cap of just about $2 trillion, Broadcom inventory has returned a staggering 3,500% to shareholders over the previous decadeafter adjusting for dividend reinvestments.
Analysts monitoring AVGO stock forecast income to extend from $63.9 billion in fiscal 2025 to $288 billion in fiscal 2030.
On this interval, adjusted earnings are projected to develop from $6.82 per share to $31 per share.
If Broadcom inventory is priced at 30x ahead earnings, much like its present a number of, it may double from present ranges throughout the subsequent 40 months.
Broadcom’s path to Tan’s $100 billion AI goal in 2027 is changing into simpler to map out.
The corporate now works with six main AI prospects, up from 5 1 / 4 in the past.
OpenAI not too long ago joined the checklist, with its first customized XPU anticipated to ship in quantity in 2027, offering greater than 1 gigawatt of computing capability.
Anthropic is scaling quick too, with demand anticipated to exceed three gigawatts of compute subsequent 12 months.
Meta’s customized chip program, which some analysts had written off, is actively ramping.
On the networking facet, Broadcom’s Tomahawk 6 swap chip, operating at 100 terabits per second, is already the one product of its form available on the market.
AI networking income grew 60% 12 months over 12 months final quarter and is anticipated to symbolize 40% of whole AI income within the present quarter.
Tan advised analysts on the earnings name that Broadcom has secured provide chain capability in modern wafers, high-bandwidth reminiscence, and substrates via 2028, an unusually lengthy visibility window that provides the corporate a structural benefit over rivals nonetheless scrambling for parts.
The size of what’s being constructed right here is tough to overstate, making Broadcom inventory a high purchase regardless of its lofty valuation.
