Is Broadcom the Best Chip Stock to Own Now? Maybe
Broadcom sits at a tollbooth on the AI buildout, and one look at its order book raises a question worth asking: why are so many chip investors still looking elsewhere?
I keep hitting the buy button on Broadcom, and after the latest quarter I have no interest in stopping.
What pulls me back is the shape of this business. Broadcom (NASDAQ:AVGO | AVGO Price Prediction) is designing custom AI accelerators for a handful of the largest cloud buyers on the planet and selling the Ethernet switching silicon that stitches those clusters together. That is a tollbooth position on the AI buildout, and the receipts keep piling up.
The Numbers That Keep Me Buying
Q2 FY2026 revenue landed at $22.19 billion, up 47.9% year over year, with non-GAAP EPS of $2.44, the eighth consecutive EPS beat. AI semiconductor revenue reached $10.80 billion, up 143% year over year, and management guided Q3 AI revenue to $16.0 billion, over 200% growth. CEO Hock Tan called demand for XPUs and networking “insatiable” and reported over $30 billion in AI bookings in the quarter, with order visibility now extending into 2028. He is standing by a fiscal 2027 AI revenue target above $100 billion.
Then there is the cash. Q2 free cash flow was $10.26 billion, 46% of revenue. Adjusted EBITDA margin sat at 69% of revenue. Operating income grew 85.07% year over year. This is a chip company throwing off software-company margins, and the balance sheet reflects it: cash and equivalents climbed to $19.63 billion, up 107.22% year over year.
The forward multiple grounds the price for me. Trailing P/E of 69 looks steep until you sit next to a forward P/E of 21 and a PEG of 0.438. Analyst consensus target sits at $527.88 with 44 buy ratings and zero sells.
Why Not NVIDIA or AMD?
The obvious reach for chip exposure is NVIDIA (NASDAQ:NVDA) or Advanced Micro Devices (NASDAQ:AMD). I own some NVIDIA. I just keep sending fresh dollars here because Broadcom occupies a different lane. NVIDIA sells merchant GPUs into an open market. Broadcom co-designs silicon with Google, Meta, OpenAI, and Anthropic, locking in multi-year commitments including 10 gigawatts of OpenAI deployment by 2029 and 3 gigawatts of Meta MTIA XPUs through 2028.
Broadcom stands apart on the income side: 15 consecutive annual dividend increases since fiscal 2011, most recently a 10% raise to $0.65 quarterly. Ten years of Broadcom turned $1,000 into $25,041. That is a compounding machine attached to an AI growth engine.
The Real Risk
Customer concentration is real. A handful of hyperscalers drive the AI revenue line, and a proposed U.S. ban on Chinese-made optical transceivers could pressure the supply chain. Insider activity has skewed to net selling across 62 recent transactions. I keep buying anyway because the $30 billion in Q2 bookings and 2028 visibility are contractual, not aspirational, and the customer list is spreading across four named frontier labs.
Forward Conviction
I am buying a designer of the silicon that AI runs on, wrapped inside a cash-return story with a 15-year dividend growth streak. As long as the order book keeps stretching further out and the free cash flow keeps landing near half of revenue, my finger stays on the buy button.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
