Where Will Broadcom Stock Be in 5 Years?
Where Will Broadcom Stock Be in 5 Years?
Will Healy, The Motley FoolThu, September 24, 2026 at 5:50 AM UTC
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Image source: The Motley Fool.Key Points -
Broadcom's chip segment has driven the stock's massive growth in recent years.
Its software segment could become increasingly important in the coming years.
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Broadcom (NASDAQ: AVGO) has experienced massive gains over the last five years. Amid demand for artificial intellgence (AI) chips and the company's ability to develop specialized semiconductors for its clients, the stock is up about 7.5-fold over the last five years.
Seeing that, one might wonder where it goes. Investors should probably not expect another 7.5-fold gain. Nonetheless, the semiconductor stock is likely to beat the market regardless of what happens with AI, and here's why.
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Broadcom's path forward
As previously mentioned, Broadcom has ridden the surge in demand for AI chips.
Consequently, its semiconductor solutions segment grew revenue by 88% in the first nine months of fiscal 2026 (ended Aug. 2), well above the 13% increase in the infrastructure software segment over the same period. With that rise, hardware now makes up $48 billion of Broadcom's $71 billion in revenue during that period, around 68% of the total.
Moreover, Fortune Business Insights forecasts a 30% compound annual growth rate (CAGR) for the AI chip business through 2024. Thus, even if growth slows, it should remain robust. This means that in a best-case scenario, its $1.7 trillion market cap could rise, making it a $3 trillion company by 2030.
However, AI has also driven the cyclically adjusted price-to-earnings (CAPE) ratio to 41, a level only matched during the dot-com boom. Although the AI boom could certainly continue, that ratio increases the likelihood that this bull market will end in an AI bust, particularly over the next five years.
Nonetheless, if such an event happens, its infrastructure software business could come to its rescue. Broadcom entered this business in part to hedge against the cyclicality of the chip industry. Fortune Business Insights estimates the software industry's CAGR at 12% through 2034. That is not as fast as the AI chip industry, but it could serve as a hedge.
Moreover, it has had one unexpected benefit. The software business has enabled the company to integrate hardware and software, likely increasing its overall growth.
Additionally, investors should remember that software has faced a so-called "SaaSpocalypse," as many investors feared AI would render some software businesses obsolete.
The continued growth of the infrastructure software segment seems to counter that narrative, as software has made up 32% of the company's revenue in the current fiscal year, around $23 billion. That is enough of a hedge to minimize the impact of any bearish scenario, helping to keep Broadcom investors in good stead.
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Broadcom in five years
Over the next five years, Broadcom's stock is unlikely to match its previous five years' performance, but it should still beat the market.
Admittedly, anything can happen in five years, so any prediction is a guess. Still, while its chip business continues to grow fast, it is unlikely to maintain that percentage even under the most favorable circumstances.
Still, its infrastructure software business hedges it against chip industry downturns and has enabled it to offer combined hardware-and-software solutions. That orientation limits its downside, even if a dreaded AI bust occurs.
More importantly, it enables Broadcom to capitalize on long-term growth in the chip and software industries, which should drive its stock higher over time.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.
Source: “AOL Money”
