Broadcom (AVGO) – A Quiet AI Giant With Explosive Upside Potential
Broadcom (NASDAQ: AVGO) may not be the flashiest AI stock on the market, but that’s exactly what makes it so compelling right now. While many AI-related names are pricing in years of growth, Broadcom’s next leg higher may still be underappreciated — especially when it comes to a lesser-known part of its business that could completely reshape its top line.
We’re talking about Broadcom’s custom AI accelerator division — a high-growth area that hasn’t yet been fully recognized by the market. Broadcom has already partnered with three hyperscalers to design XPUs, a type of AI chip optimized for specific workloads. Unlike general-purpose GPUs, these XPUs are tailor-made for efficiency and performance — and they’re already in deployment. The company expects to launch designs for two more major clients by year-end and just secured two additional design wins. That brings the total to seven hyperscalers actively collaborating with Broadcom on this front.
Management estimates the addressable market for these XPUs could reach $60 to $90 billion by 2027 — and that’s with only a handful of clients. For context, Broadcom generated $12.2 billion in revenue from XPUs and networking switches in FY2024. If it captures even half of that projected XPU market, it could double revenue from that segment alone.
The rest of the business is no slouch either. Broadcom’s acquisition of VMware in late 2023 for $69 billion is already paying off, giving the company a solid foothold in virtual desktop infrastructure and recurring software revenue. Between legacy infrastructure, high-margin software, and its under-the-radar AI division, Broadcom is quietly positioned as one of the most well-rounded tech platforms in the space.
At its current price of $177.44 (as of April 14, 2025), Broadcom remains down about 30% from its all-time high, despite its forward-looking fundamentals improving. It trades at around 28x forward earnings — not cheap, but far more reasonable than many other names in the AI space, especially considering the revenue and margin expansion potential.
We see this as a smart entry point for long-term investors. While the hype continues to swirl around more obvious AI plays, Broadcom is building the infrastructure behind the scenes — and the numbers suggest it’s just getting started.
