With a Estimated growth in global artificial intelligence or AI spending for data centers in the 6.7 trillion dollars in 2030, Broadcom is presented as the best option to invest facing the next market rally thanks to its position in the sector. Although not risk-free, according to Manali Pradhan in Yahoo Finance.
Broadcom’s custom silicon chips are in high demand by leading hyperscalers and AI model developers. In October 2025, Broadcom partnered with OpenAI to develop and implement 10 gigawatts of custom AI chips. Deployment was scheduled to begin in the second half of 2026 and continue through 2029. The company will also co-develop Ethernet solutions and other connectivity solutions needed to support large AI clusters.
In October, Anthropic also announced an expanded agreement with Alphabet-Ato use almost one million tensor processing units (TPU) of the latter and gain access to more than a gigawatt of computing capacity by 2026. Broadcom is rumored to also benefit from this deal, as it has been the main partner of Alphabet in the chip design for these TPUs.
These strategic agreements ensure long-term revenue visibility and position Broadcom as a key player in the development of global AI infrastructure.
Network demand
With the increasing complexity of AI models and the increasing size of AI clusters, the demand for open source Ethernet networking hardware and software in data centers is increasing at an unprecedented rate. The need for low-latency, low-congestion, and high-bandwidth networks has become critical as AI clusters surpass 100,000 compute nodes.
The chips Tomahawk de Broadcombased on Ethernet, allow open and efficient networking between GPU and XPU within a rack, also known as scale-up networking. The company also uses advanced Tomahawk switches for scale-out networking, simplifying connections and communication within racks in an AI cluster.
Lastly, hyperscalers are implementing Jericho fabric routers from Broadcom, offering deep buffering and intelligent congestion control capabilities for scale-cross networking, capable of connecting AI clusters with more than 200,000 compute nodes in multiple data centers.
Backed by strong demand for its custom silicon and Ethernet networking solutions, Broadcom expects its AI semiconductor division to grow by 66% year-on-yearreaching the 6.2 billion dollars in the fourth quarter of fiscal year 2025.
The software business
Broadcom’s high-margin software business is also gaining ground, with VMware representing almost the 43% of its total revenue in the third quarter. Software revenue increased by 17% year-on-year, until 6.8 billion dollarsdriven by a solid order book. The business also recorded a 93% gross margin and a operating margin of 77%.
The company has launched an integrated cloud platform called VMware Cloud Foundation versión 9.0which enables enterprises to run traditional and AI workloads on-premise, in hybrid environments, or in the cloud. This provides a secure alternative to running workloads in the public cloud.
Financial results
Broadcom’s recent financial results have been impressive. In it third quarter of fiscal year 2025 (ended August 3), the income increased a 22%interannualreaching the 16 billion dollarswhile the margin of Adjusted EBITDA stood on a solid 67%. The company also generated a free cash flow of $7 billion.
Broadcom now expects revenue growth of 24% year over year to $17.4 billion and an adjusted EBITDA margin of 67% in the fourth quarter. This objective seems easily achievable, taking into account that the company had a contracted order book of $110 billion at the end of the third quarter.
Valuation
Broadcom shares are currently trading at 39.7 times forward earningsa high rating. This is mainly because the company’s non-AI semiconductor business shows a gradual recovery. The company’s AI growth also relies heavily on four major hyperscaler customers. This customer concentration risk makes it vulnerable to any changes in the plans of these key clients.
However, the high valuation also reflects investors’ confidence in the company’s exceptional ability to execute, its strong order book and its pivotal role in the development of AI infrastructure. Therefore, despite the risks, the stock looks like a good option ahead of any potential future market rally.
Broadcom It is trading lower on Friday afternoon at $347.72. The 70 and 200 period moving averages remain below the price, RSI is down at 47 points and the MACD lines are above the zero level.
Medium and long-term resistance remains at $386.46. Meanwhile, Ei indicators are mixed.