The race for artificial intelligence infrastructure dominance is intensifying, with Broadcom (AVGO) projected to maintain its leadership as an AI server compute ASIC design partner, capturing 60% market share by 2027, according to Counterpoint Research.
Tech behemoths such as Alphabet (GOOGL) (GOOG), Amazon (AMZN), Microsoft (MSFT), and Meta (META) are swiftly transitioning towards customized AI chips, signaling a significant expansion in the ASIC market. The demand for AI server compute ASIC shipments is anticipated to triple by 2027 as hyperscalers invest heavily in building extensive infrastructure to support their AI initiatives. This surge is being primarily driven by the need for specialized chips that power a wide array of applications, ranging from Google’s Gemini models to Amazon’s Trainium clusters and Microsoft’s Maia processors.
The industry is experiencing a noteworthy shift towards in-house AI server compute ASIC design growth, signaling the emergence of the in-house custom XPU era. This era emphasizes the development of AI accelerators tailored for specific workloads, reinforcing the importance of custom silicon solutions. As power and space limitations become more stringent, hyperscalers are increasingly turning to custom silicon solutions, with Broadcom positioned at the forefront as the key design partner facilitating this transformation.
Broadcom is solidifying its position as a dominant player in the burgeoning artificial intelligence infrastructure market. In fiscal 2025, the company reported AI sales of $20 billion, marking a 65% year-over-year increase. It anticipates AI revenue to double in fiscal Q1 of 2026, surpassing $8 billion. CEO Hock Tan’s compensation incentives are aligned with the goal of growing AI revenue to over $120 billion by 2030, underscoring the company’s commitment to capitalizing on the AI market opportunity.
Broadcom boasts a comprehensive product portfolio in the AI data center segment, offering not only custom AI accelerators but also critical networking components like Tomahawk switches, digital signal processors, optical components, and PCI Express switches. With over $73 billion in AI-related backlog expected to be shipped in the next 18 months, including $53 billion tied to custom accelerators alone, Broadcom is strategically positioned to capitalize on the growing demand for custom silicon solutions among hyperscalers.
While Nvidia (NVDA) currently dominates the general-purpose GPU market, companies focusing on building large language models are increasingly turning to application-specific integrated circuits for enhanced performance per watt. Broadcom has already secured five major customers for custom accelerators, with demand continuing to rise. Additionally, Broadcom’s networking business is poised to benefit from the AI infrastructure buildout, with the latest Tomahawk 6 switch generating record orders exceeding $10 billion in backlog.
As AI clusters scale to incorporate hundreds of thousands of processors, the networking infrastructure becomes more crucial and complex, aligning with Broadcom’s engineering strengths. With a total consolidated backlog reaching $162 billion and AI accounting for nearly half of that figure, Broadcom is well-positioned to leverage the multi-year AI infrastructure buildout. The company anticipates this momentum to accelerate through 2026 and beyond as customers strive to enhance their AI capabilities.
Trading at a market cap of $1.6 trillion, AVGO stock has surged 457% over the last three years and 2,388% in the past decade. Analysts project revenue to climb from $63.9 billion in fiscal 2025 to $236 billion in fiscal 2030, with adjusted earnings forecasted to rise from $6.82 per share to $23.37 per share in the same period. If AVGO stock is priced at 25x forward earnings, indicating an upside potential of nearly 150% from current levels.
Out of the 42 analysts covering AVGO stock, 36 recommend a “Strong Buy,” three recommend a “Moderate Buy,” and three recommend a “Hold.” The average AVGO stock price is $455.22, above the current price of $333.
In conclusion, Broadcom’s strong position in the AI infrastructure market, coupled with its robust product portfolio and strategic partnerships, bodes well for its future growth and market performance.
