AI Spending Boom: Top Stock to Buy Now

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Broadcom Ascends as AI Chip Demand Surges, Challenging Nvidia’s Dominance

As spending on artificial intelligence (AI) infrastructure continues its explosive growth, a notable shift is underway in the market. While Nvidia’s graphics processing units (GPUs) currently lead the field, an increasing number of major companies are turning to custom-designed AI ASICs – request-specific integrated circuits – to power their demanding workloads. These specialized chips, pre-programmed for specific tasks, offer compelling advantages in both performance and energy efficiency.

The Rise of Custom Silicon

At the forefront of this trend is Broadcom (NASDAQ: AVGO), rapidly becoming the preferred partner for hyperscalers – the owners of large data centers – seeking to develop their own AI chips. Broadcom excels in ASIC technology,providing the essential building blocks and intellectual property (IP) needed to transform customer designs into manufactured chips at scale.

Broadcom first gained prominence by collaborating with Alphabet on its highly-regarded tensor processing units (TPUs).The company continues to benefit from the success of TPUs, and is poised to deliver $21 billion worth of these chips to Anthropic later this year. This follows Alphabet’s decision to offer TPUs to customers through its Google Cloud computing platform. The success of Alphabet’s TPUs has, in turn, spurred other hyperscalers to explore Broadcom’s ASIC services.

Did you know? – AI ASICs are designed for specific AI tasks, unlike GPUs which handle a wider range of computing jobs. This specialization leads to greater efficiency and performance for those targeted tasks.

A $60 Billion to $90 Billion Opportunity

According to the company, its initial three customers – widely believed to be Alphabet, Meta Platforms, and TikTok owner ByteDance – represent a potential $60 billion to $90 billion market opportunity by fiscal year 2027. More recently, Broadcom has added OpenAI to its client roster, securing a deal to supply custom AI accelerators capable of supporting data centers with a staggering 10 gigawatts of computing power. Based on current Nvidia GPU pricing, this deal alone is estimated to be worth around $350 billion.

Pro tip – Hyperscalers are increasingly favoring custom AI chips to optimize performance and reduce reliance on third-party GPU providers, driving demand for companies like Broadcom.

Reports also indicate that Broadcom is collaborating with apple to develop custom AI chips for the iPhone maker.Analysts at Citigroup project Broadcom’s AI revenue to surge from approximately $20 billion in the last fiscal year to over $50 billion in the current fiscal year,and then double again to $100 billion by fiscal 2027. Considering Broadcom’s total revenue was $63.9 billion in the recently completed fiscal year 2025,this represents an exceptional growth trajectory.

Reader question – How might Broadcom’s VMware business complement its AI chip growth, and could it create synergistic opportunities?

Beyond AI: VMware and Semiconductor Rebound

The growth potential extends beyond AI. Broadcom’s VMware virtualization business is expected to maintain solid growth, while the company’s broader semiconductor business, having reached a low point, is positioned for a potential rebound in the coming years. With AI spending projected to accelerate and companies actively seeking alternatives to Nvidia’s GPUs to reduce costs, Broadcom appears well-positioned to be a major beneficiary.

Is Broadcom a Buy Now?

While the company’s prospects appear bright, investors should note that the Motley Fool Stock Advisor analyst team did not include Broadcom among their current top 10 stock recommendations. the team’s past picks,