meanwhile Nvidia and tesla is dominating the headlines, but another company has quietly joined the top spot. At the time of writing this article, broadcom (AVGO +4.75%) The company is worth about $2.1 trillion, nearly $5 trillion more than Tesla and one of the few companies to ever reach that level. But for a company of this size, only a few are getting attention. Its products are never left in the driveway or in the living room. These are deep within the data centers that train and run artificial intelligence (AI). And that’s exactly where the money is flowing.
Broadcom has quietly become the most important AI chip company after Nvidia, the world’s most valuable company. The stock is up about 85% over the past year, recently hitting all-time highs and well above all-time highs. S&P500. The question is, is there still room for this overlooked giant, or has the market finally caught up?
Image source: Getty Images.
Different types of AI chip companies
Nvidia sells general-purpose graphics processing units (GPUs) that almost any customer can purchase off-the-shelf. Broadcom is doing something more specific and difficult to replace for a few huge customers. It co-designs custom AI accelerators (chips tailored to a single company’s workload) and sells networking silicon that stitches thousands of those chips together into one giant cluster.
This combination has resulted in tremendous growth. Broadcom’s sales for the first quarter of fiscal 2026 (period ending February 1, 2026) increased 29% year-on-year to $19.3 billion, a record high. The Semiconductor Solutions segment, which includes AI products, grew 52% to $12.5 billion. AI revenue alone more than doubled, increasing 106% to $8.4 billion, exceeding the company’s own expectations. Custom accelerator business grew 140%, and AI networking revenue grew 60%, now accounting for a third of total AI sales and heading towards 40%.
Even as they scale up, chipmakers still mint cash.
Broadcom’s free cash flow reached $8 billion last quarter, accounting for 41% of revenue, and non-GAAP (adjusted) earnings per share increased 28%. Additionally, Broadcom returned $10.9 billion to shareholders through stock repurchases and dividends, and its board of directors authorized an additional $10 billion in stock repurchases.
But it’s probably the future outlook that has driven up the stock price recently. Broadcom is currently building custom chips for six large customers. That list includes: alphabetGoogle, MetaAnthropic, and recently OpenAI. Management told investors that AI chip revenue is expected to reach more than $100 billion in 2027, and that the company has already secured manufacturing capacity to deliver everything from advanced wafers to high-bandwidth memory by 2028. At its last report, Broadcom expected revenue for the next quarter to rise 47% from a year earlier to $22 billion, with AI chip sales accelerating to $10.7 billion.
Today’s changes
(4.75%) $20.28
current price
$446.86
Key data points
Market capitalization
$2.1 trillion
daily range
$431.50 -$448.88
52 week range
$241.11 -$448.90
volume
1.2M
average volume
23.8M
gross profit
64.96%
dividend yield
0.56%
Overlooked, but not cheap
If the business is so strong, why isn’t Broadcom getting more attention?
Probably because they sell to other companies rather than consumers. Broadcom doesn’t have cars or phones, and CEO Hock Tan isn’t as well-known a name as Tesla’s Elon Musk or Nvidia’s Jensen Huang. So even though the company has surpassed Tesla in value, many retail investors have never paid attention to it.
But that doesn’t mean the stock is cheap.
As of this writing, Broadcom trades at a price-to-earnings ratio of approximately 87 times. This is a rich valuation multiple that assumes AI builds will continue to run for years and these custom chip programs will continue to proliferate. At this price, there’s little room for disappointment.
What is the biggest risk? Customer concentration. There’s always a chance that a small number of customers will make up the bulk of the AI business, and each will choose to design the chips in-house or move their spending elsewhere.
But Broadcom management insists it won’t.
“For them, and for all of my customers in this space, this is a strategic move. It’s not an option,” Broadcom CEO Hock Tan said on the company’s fiscal first quarter earnings call, describing the custom silicon programs these customers are building with chipmakers.
Still, the semiconductor industry has historically moved in cycles. Additionally, investors cannot rule out the possibility that AI spending cools sooner than the market expects. If Broadcom’s biggest customers delay orders, the company’s growth and valuation could plummet.
For investors who believe the AI infrastructure boom will continue for years yet, Broadcom may be one of the most obvious beneficiaries. It’s a business that’s firing on all cylinders, with a name recognition rivaled by its peers. But after such a huge rally, the stock’s margin of safety is thin.
This is a remarkable company. But at today’s prices, it’s far from a low-risk stock.
