Broadcom has made huge profits over the past five years.
The company’s AI chips have played a key role in its success.
Investors can find the next Broadcom by considering the key factors that led to its rise.
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Broadcom(NASDAQ:AVGO) It has been one of the best stocks to hold over the last decade. It has rallied nearly 4,000% over that stretch, including a 10x return over the past five years.
Investors can’t expect those kinds of returns from Broadcom over the next decade. The artificial intelligence (AI) chip maker’s market capitalization would exceed annual US GDP if the stock soared nearly 4,000%.
That’s why investors are looking for the next Broadcom. They want to be on the ground floor before a stock rises 4,000% in the last decade.
Some investors refer to these types of gains as “generational returns,” but such opportunities occur much more frequently than once in a generation. The amazing manifestations of tesla and Palantir Technologies They are only separated by a few years.
Broadcom shares several key factors with other high-growth stocks that have generated what many investors would consider generational returns. Knowing what made Broadcom the company it is today can help you identify the next long-term winner.
Image source: Getty Images.
The biggest companies solve incredible problems, and Broadcom is no exception. The company has been producing semiconductor chips long before the advent of AI, and Broadcom chips were once found in every iPhone. Its technology forms the basis that allows other companies to solve big problems.
Broadcom chips are found in many computers, wireless routers, video game consoles, and other devices. Those products have significant consumer demand, but they also require chips to operate. Broadcom is not the only chip maker, but it is a leader in the industry. Computers and other critical products cannot function without chips.
AI has increased the demand for advanced chips and has been a boon for Broadcom. Technology can revolutionize the world much more than the Internet at its best.
Tesla CEO Elon Musk recently shared on X that AI can solve hunger, disease, and poverty. Sundar Pichai, CEO of Google and its parent company, AlphabetHe also said that AI is “more important than fire or electricity.”
If AI is so important, then chipmakers like Broadcom are, by extension. Broadcom is driving technology that business leaders say can solve hunger and is more important than electricity. Very few companies are solving those types of problems and that is why Broadcom is one of the largest corporations on the planet.
Considering which companies are solving problems that may have consequences may lead to the next Broadcom.
There are two ways to grow a business. You can focus on serving a few high-paying customers or offering products or services to a large customer base. While Walmart Although it does a good job of attracting millions of people to its stores each day, Broadcom doesn’t have as many customers.
The company also works with smaller companies, but most of its revenue comes from large corporations, especially tech giants that want chips. Broadcom has a deep partnership with Google that includes designing custom AI chips, and that got Metaplatforms‘ attention. Facebook’s parent company is discussing a multibillion-dollar deal for Google chips, which bodes well for Broadcom.
When Broadcom lands a new customer, it can result in a multi-million dollar deal and such transactions can significantly boost the stock price. Investors saw this recently, with Broadcom rising more than 10% on news that Meta Platforms was in talks to buy Google’s artificial intelligence chips.
Examining how larger companies allocate their resources can reveal promising growth stocks, especially when they’re just starting to gain momentum.
Broadcom has made several acquisitions over the years that prepared it for the rise of AI. Ironically, one of the biggest acquisitions was when Avago acquired Broadcom for $37 billion and renamed it Broadcom. That’s why Broadcom trades under the symbol AVGO instead of a symbol that looks more like the spelling of Broadcom.
That decision made Broadcom more competitive against other chipmakers and significantly helped attract large customers. The company also acquired semiconductor company LSI Corporation for $6.6 billion in 2013. More recently, Broadcom acquired VMware to expand its software business.
Other tech giants have made their way to greater market share. Google bought YouTube to get an early start on video content, Amazon bought Whole Foods to increase its presence in grocery stores, and Meta Platforms bought Instagram to capitalize on a high-engagement social network.
Each of those companies has made additional acquisitions and investments. It’s part of becoming a corporate giant like Broadcom.
Broadcom has long-term customers and offers essential technology, and iren(NASDAQ: IREN) Check those boxes too. Instead of creating AI chips, Iren creates AI data centers at scale and just signed a five-year, $9.7 billion deal with microsoft. It also supplies energy, which is currently the main obstacle in the development of AI.
Iren already has several gigawatts and AI data centers to support additional deals, and co-CEO Dan Roberts recently told CNBC that the company “can’t meet demand fast enough.” That’s a good bullish indicator, especially since most of the demand for AI comes from tech giants with a lot of money to spend.
Iren’s data centers are optimized for the rigorous power demands of AI tools and software. Typical data centers are not good enough for this new technology boom because they cannot handle AI workloads. Iren is still a small company with a market capitalization of less than $15 billion, but it is solving exactly the same problems as Broadcom.
As Iren grows, the AI data center provider is expected to acquire smaller companies to increase its market share. That will put it even further on the path to becoming the next Broadcom.
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Marc Guberti has positions at Broadcom and Iren. The Motley Fool positions and recommends Alphabet, Meta Platforms, Microsoft, Palantir Technologies, Tesla, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
The Secret to Finding the Next Broadcom Is Hiding in Plain Sight was originally published by The Motley Fool
