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Broadcom has a huge opportunity in front of it with custom AI chips.
TSMC has become a virtual monopoly on manufacturing advanced AI chips.
AppLovin has been seeing strong growth and has a couple of potential growth catalysts on the horizon.
The biggest driver of the stock market over the past decade has been tech growth stocks. Let's look at three red-hot growth stocks in the tech sector that are worth closer consideration today as we enter 2026.
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When it comes to megacap tech stocks, none may have a better growth outlook over the next few years than Broadcom (NASDAQ: AVGO). The company is seeing strong growth from its networking portfolio, which helps manage the transfer of data within an artificial intelligence (AI) data center. However, its biggest opportunity is helping companies design custom AI chips.
Broadcom is a leader in ASIC (application-specific integrated circuit) technology, where it provides customers with access to its intellectual property portfolio and helps them make the chips through its relationship with Taiwan Semiconductor Manufacturing (NYSE: TSM), where it both has the capacity and can use the foundry's advanced packaging technologies to manufacture more powerful chips. The company helped Alphabet design its popular Tensor Processing Units (TPUs), which are sending other companies flocking to its services.
This is expected to lead to explosive growth in the coming years, with Citigroup analysts projecting the company will see AI revenue grow to $50 billion in fiscal year 2026 and $100 billion in fiscal 2027. Broadcom generated $20 billion in AI revenue and a little under $64 billion in total revenue this past fiscal year.
Taiwan Semiconductor Manufacturing is one of the companies best positioned to continue to benefit from the ongoing AI infrastructure build-out. The company has a near monopoly on manufacturing advanced chips, such as graphics processing units (GPUs) and AI ASICs, and as such, has become an invaluable partner to the semiconductor industry. It sees demand for AI chips growing at a mid-40% compound annual growth rate (CAGR) over the next few years.
One of TSMC's big advantages is that it is the only chip manufacturer that has been able to achieve high yields for advanced logic chips at small node sizes, which is a density measure of how many transistors can fit on a chip. Shrinking node sizes is important for chip designers, as this is what helps make their chips both more powerful and more energy efficient. While others have struggled, yields for TSMC's newest 2-nanometer technology have been better than expected, leading the company to push up the time frame for building new fabs that can handle 1.4nm technology (this is two generations ahead, with 1.6nm coming next).
As essentially the only game in town, TSMC also has seen strong pricing power and has already informed customers of expected price hikes over the next four years.
AI infrastructure is not the only area of growth in the technology space. AppLovin (NASDAQ: APP) has been using AI with its adtech platform Axon 2 to become the dominant player in mobile game advertising. Since Axon 2's launch back in 2023, AppLovin has seen rapid revenue growth and gross margin expansion. It's also been able to significantly reduce its operating costs. Last quarter, its revenue surged 68% to $1.41 billion, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 79% to $1.16 billion.
The company believes its core mobile gaming ad revenue can grow between 20% and 30% just from industry growth and algorithm improvements. However, the company has some nice additional growth catalysts on the horizon. It recently launched a self-serve ad manager that should attract more small and midsize advertisers to its ad platform, and it's looking to expand beyond its core market into other verticals, like e-commerce. It also sees a big opportunity in AI ad generation, as customers outside the gaming industry don't tend to create the longer ads that perform well on its platform.
If AppLovin can successfully lure additional clients to its platform outside of mobile gaming, the company has a lot of growth in front of it.
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Citigroup is an advertising partner of Motley Fool Money. Geoffrey Seiler has positions in Alphabet and Broadcom. The Motley Fool has positions in and recommends Alphabet and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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