Broadcom's AI Surge: $230B Revenue Target

Broadcom reported a substantial 221% year-over-year increase in artificial intelligence (AI) semiconductor revenue, reaching $16.7 billion in its fiscal third quarter of 2026. This significant growth propels the company to the forefront of the massive data center spending trend. The company anticipates AI chip revenue to accelerate further, projecting $21.7 billion for the fiscal fourth quarter.

Broadcom's strategic importance is underscored by its role as a design partner for leading AI initiatives. It collaborates with Alphabet's Google on Tensor Processing Units (TPUs), OpenAI on its custom AI inference chip, Jalapeno, and Meta Platforms on its MTIA accelerator. These partnerships are instrumental in driving the company's AI revenue momentum.

The company has set an ambitious target of achieving $230 billion in AI chip revenue by fiscal 2028. This projection suggests potential earnings per share of around $30 and free cash flow of approximately $135 billion for fiscal 2028. Despite potential risks from component shortages and regulation, Broadcom's current valuation appears attractive relative to its growth prospects.

While Broadcom relies on a few major customers for its AI chip orders, it has secured necessary supply chains to meet future demand. The company's stock currently trades at approximately 12 times its fiscal 2028 earnings target, presenting a compelling opportunity for investors if its valuation multiple expands.