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New: Instantly spot drawdowns, dips, insider moves, and breakout themes across Maps and Screener.
Broadcom outperformed every “Magnificent Seven” stock in 2025.
Its AI role justifies expansion of the Magnificent Seven to the “Ten Titans.”
The stock is attractively valued, assuming the business can maintain its growth.
After a red-hot first half of 2025, I predicted that Broadcom (NASDAQ: AVGO) would continue to run higher in the second half of last year due to its leading position in global connectivity and artificial intelligence (AI). Sure enough, Broadcom soared 25.6% in the second half of 2025 and finished the year up 75.5% -- outperforming all the "Magnificent Seven" stocks.
Broadcom has compounded in value by so much in recent years that it justified expanding the Magnificent Seven to a group that I coined in August of last year -- the "Ten Titans," made up of:
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The Ten Titans are so massive that they make up a combined 38.1% of the S&P 500. Despite Broadcom's rapid run-up, the stock has pulled back in recent months and is down 22.5% from its 52-week high, at the time of this writing. Here's why the sell-off is an incredible buying opportunity for growth stock investors.
Image source: Getty Images.
Even after factoring in its recent sell-off, Broadcom is up a mind-numbing 447% over the last three years. When an established, industry-leading company has a massive gain in a relatively short period of time, it's usually because it caught the market off guard. And in Broadcom's case, Wall Street underestimated the growth rate of its AI business because it viewed Broadcom as a legacy networking, enterprise software, and broadband/wireless company.
To be fair, most of Broadcom's non-AI business is doing just OK, with non-AI semiconductor revenue in its latest quarter up just 2% year over year. But Broadcom's AI growth is impossible to ignore. The company has carved out a highly valuable niche in the AI value chain by designing custom XPU chips, paired with networking devices such as the latest Tomahawk 6 switches and Jericho4 routers.
Broadcom's solution can be more cost-efficient than general-purpose graphics processing units (GPUs) for certain AI functions, which is why its partnership with Alphabet on its custom Tensor Processing Unit has been getting a lot of attention. And Broadcom's integrated system makes a lot of sense, given bottlenecks facing AI data centers -- namely, memory, load balancing, and congestion, which causes latency.
Memory chip advancements haven't kept pace with GPUs, which is why AI data centers are demanding high-bandwidth memory -- driving stocks like Micron Technology to soar. It's like having a sports car engine on low fuel: The power doesn't matter if there's limited gas. Broadcom's solution doesn't solve the memory bottleneck, but it does address network issues to boost bandwidth.
Broadcom has been selling off lately because its earnings growth is heavily dependent on AI spending by major hyperscalers and because Nvidia has made strides in reducing GPU operating costs through a vertically integrated rack-scale hardware and software system. Nvidia's Vera Rubin architecture consists of a GPU plus five other chips, which Nvidia claims will massively reduce costs and accelerate workflows -- directly challenging Broadcom’s foothold in data center networking.
The hyperscaler spending cycle and competition are factors worth monitoring. But the pie is big enough for Broadcom, Nvidia, and other companies to grow as AI infrastructure expands. Given supply chain bottlenecks, hyperscalers don't want to be dependent on a single supplier or solution. And the flurry of orders that Broadcom and Nvidia received in recent quarters shows that both companies are winning business.
That said, investors should continue listening closely to management commentary on Broadcom's earnings calls to see if it can continue winning business to build custom chips for major customers, and if these solutions lead to measurable cost savings in mega-scale data centers.
In the meantime, Broadcom's 31.1 forward price-to-earnings ratio is an incredibly reasonable valuation for such a high-growth company, especially given Broadcom isn't betting the farm on AI and has several other levers it can pull to grow over the long term.
Before you buy stock in Broadcom, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
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Daniel Foelber has positions in Nvidia and Oracle and has the following options: short March 2026 $240 calls on Oracle. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Micron Technology, Microsoft, Netflix, Nvidia, Oracle, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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