CANADA – 2025/09/06: In this photo illustration, the Broadcom logo is seen displayed on a smartphone screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Broadcom’s stock (NASDAQ: AVGO) just jumped 11% on November 24, fueled by enthusiasm surrounding its Google AI chip partnership and the successful launch of Alphabet’s new Gemini 3 model. The stock has already more than doubled over the past year, currently trading around $380. Hence, the obvious question arises: what would be necessary to achieve another doubling?
Let’s examine the numbers and the catalysts that could facilitate this. However, if you desire an upside with less volatility than owning an individual stock like AVGO, consider the High Quality Portfolio. It has effectively outperformed its benchmark—a mix of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its launch. What accounts for this? As a collective, HQ Portfolio stocks delivered better returns with reduced risk compared to the benchmark index; it’s a smoother ride, as highlighted in HQ Portfolio performance metrics.
The Math Behind a Double
Is it possible for earnings to double in three years? Yes, and here’s a clear path to achieving that. Broadcom currently has approximately $60 billion in trailing revenue, with an impressive adjusted net margin exceeding 50% and a 32% GAAP net margin. This indicates that each new dollar of revenue translates into approximately 50 cents in profit — a striking attribute that fosters exponential earnings growth.
If revenue rises to $120 billion by 2028 (primarily fueled by AI chips and VMware subscriptions), we can expect adjusted EPS to increase from around $6.29 today to over $12. This near-doubling of earnings serves as the foundation.
However, earnings growth alone doesn’t increase stock values dollar-for-dollar. What about the valuation?
Exactly. The stock is currently trading at over 60 times its trailing earnings — a high multiple that reflects Broadcom’s premier positioning. If this multiple remains at 60 times, then $12 in EPS translates to a $720 stock price. And if the AI narrative gains even more momentum? That multiple could extend, driving the stock price even higher. Take a look at our dashboard on AVGO Stock Valuation Ratios.
What Could Actually Drive That Revenue Growth?
The Gemini 3 catalyst is intriguing, but is it truly a transformative element?
It serves primarily as a validation signal. Google’s success with Gemini 3 indicates that AI models are transitioning from laboratory trials to large-scale production deployment. As Alphabet integrates advanced AI across search, cloud, and consumer products, it requires immense inference capacity. That’s where Broadcom’s custom TPU chips play a crucial role.
Here’s the key point: inference has emerged as the growth engine. Training AI models was the initial phase — creating those models necessitates massive computing resources. However, inference — the actual execution of those models billions of times daily for real users — is where the long-term, sustained demand exists. Broadcom leads in this stage due to its custom silicon and networking solutions optimized for high-volume, power-efficient inference tasks.
What is the potential size of this inference opportunity?
Consider that Broadcom already has four confirmed hyperscale customers, including Google and Meta, for custom AI chips. As these corporations expand their AI services, they will require continuous generations of faster, more efficient chips. The technical barriers are significant — designing custom accelerators demands multi-year engineering collaborations and deep integration. Once you are established, it becomes difficult to move away.
The recent upgrades by analysts aren’t merely responding to a single data point. They are acknowledging that Broadcom occupies a vital junction: hyperscalers require custom silicon to set their AI platforms apart, and Broadcom stands as one of the few firms with the capacity to deliver at scale.
Beyond AI Chips: The Networking Advantage
Are chips only part of the picture?
Indeed, this is where Broadcom’s positioning becomes particularly compelling. Constructing an AI cluster is not solely about processors — it necessitates ultra-high-speed networking to connect thousands of accelerators. Broadcom’s Tomahawk Ultra switches can connect up to 1,024 accelerators within a single rack, far exceeding its rivals. These networking chips constitute essential infrastructure and are being produced in volume now.
As hyperscalers develop larger AI clusters (some nearing 100,000+ GPUs), the networking infrastructure grows even more essential. Broadcom’s advantage in co-packaged silicon photonics — technology that enhances data transfer speed and efficiency — gives it a sustained competitive advantage in this rapidly expanding sector.
The VMware Wild Card
VMware seems nearly overlooked in the AI discussion. Does it really matter?
It is extremely significant for the doubling thesis as it offers a second, independent growth engine with distinct attributes. While AI is high-growth but concentrated, VMware provides stable, recurring software revenue with outstanding margins.
The integration is progressing ahead of schedule. VMware, part of the infrastructure software segment, experienced a 17% growth year-over-year, rising to $6.8 billion in Q3, and Broadcom is effectively transitioning customers to subscription models. This isn’t just about top-line growth — it’s about converting perpetual licenses into predictable annual recurring revenue with minimal additional costs. The cash flow from VMware will be substantial and durable, supporting both reinvestment in AI R&D and shareholder returns.
How does this contribute to the stock doubling?
It reduces the risk of the overall narrative. If AI chip demand were the sole engine driving Broadcom, any slowdown would severely impact the stock. However, with VMware generating consistent cash flow, Broadcom can endure fluctuations in semiconductor cycles. This blend of high-growth AI and stable software is precisely what supports a sustained premium multiple.
The Risks You Can’t Ignore
What could disrupt this trajectory?
Three factors warrant caution.
- First, customer concentration. Broadcom’s AI revenue relies on a few hyperscalers. If even one customer reduces spending or brings more chip design in-house, it could significantly affect the numbers. These collaborations are deep, yet they are also concentrated.
- Second, competition is escalating. Marvell is fiercely competitive in custom silicon (See – Marvell Stock: Overlooked AI Winner?). NVIDIA isn’t remaining idle either. Related – The $5 Trillion AI Risk Sitting in the Taiwan Strait. Furthermore, every hyperscaler is investing in its chip teams. Broadcom’s advantages are substantial, but not unassailable. Any indication of market share loss or price pressure would negatively impact both earnings and the valuation multiple.
- Third, this stock is prone to volatility. Broadcom has experienced 50% drawdowns during broader market corrections. It fell more sharply than the S&P 500 during both the COVID-19 crash and the 2022 inflation sell-off. Should we face a recession or a freeze in tech spending, Broadcom will likely feel the impact acutely.
Hence, investing in a single stock without thorough analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to generate robust returns for investors. What accounts for this? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks has offered a responsive manner to take advantage of positive market conditions while limiting losses when markets decline, as outlined in RV Portfolio performance metrics.
The Bottom Line: Can It Double?
So what’s the realistic scenario here?
If Broadcom successfully executes on AI — acquiring more customers, increasing Tomahawk Ultra production, and sustaining its inference edge — while concurrently enhancing VMware’s recurring revenue, the pathway to $700+ over the next few years appears plausible. The rally spurred by Gemini 3 illustrates that the market is closely monitoring these catalysts.
The numbers add up: near-doubling earnings alongside a consistent 60x multiple could lead you there. And if AI infrastructure spending surpasses expectations, or if VMware margins grow faster than projected, the stock may exceed $800.
Is it worth the risk?
For investors with a three-year outlook who can handle 30-50% drawdowns, Broadcom presents a legitimate opportunity to double their investment. The company is situated at the crossroads of two substantial trends — AI infrastructure and cloud software subscriptions — with outstanding execution and profitability.
However, you would be investing in volatility along with growth. This isn’t a steady compounder; it represents a high-beta play on AI capital expenditures. If that investment cycle falters, or if key customers change direction, the potential downside is significant. The question isn’t whether Broadcom can double — it’s whether you can navigate the inevitable turbulence to reach that goal.