Key Points
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The AI infrastructure build-out is still in its early innings, which suggests that there is still a lot of money to be made for companies supplying it.
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Nvidia and Broadcom both gave guidance for their fiscal 2028s that points to substantial AI growth.
- 10 stocks we like better than Broadcom ›
Boring investing strategies aren’t always bad. While some people look for hidden opportunities that no one is considering, the best investments may be hidden in plain sight.
That’s why my boring prediction is that AI stocks will continue to rally. These stocks aren’t exactly the greatest-kept secrets. Nvidia (NASDAQ: NVDA) has grown into the world’s most valuable publicly traded company in recent years. More investors are also looking toward smaller AI stocks instead of just relying on chipmakers, which is the same approach I have used for my portfolio.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
It may be boring to hear yet another person advocate for AI stocks, but the technology’s evolution and upcoming catalysts suggest that this approach is still solid.
Image source: Getty Images.
Nvidia and Broadcom offered multiyear forecasts
AI investors should carefully monitor Nvidia and Broadcom (NASDAQ: AVGO) when assessing how far the AI rally can go. This has been true for years. While I have been bullish about AI stocks for years, their recent results have increased my resolve.
Broadcom reported 86% year-over-year revenue growth in its fiscal 2026 third quarter. Revenue for its AI semiconductor segment was up by 221% and made up more than half of total sales.
However, the bigger news came in the chipmaker‘s earnings call. Broadcom told investors that it expects its AI chip revenue to double to $115 billion in its fiscal 2027, and then to double yet again to $230 billion in its fiscal 2028.
It’s rare for a company to give revenue guidance two years in advance, and this outlook points to continued parabolic growth. It’s not just Broadcom. Nvidia said it anticipates 70% year-over-year revenue growth in its fiscal 2028, and cited supply chain issues as a factor limiting growth to that level. If the shortages of components are less of an issue than expected, Nvidia anticipates a level of demand that would result in a higher growth rate.
Hyperscalers are reaping massive rewards for their AI investments
The money that is going toward AI data centers is producing tangible growth for the largest developers of that infrastructure. Hyperscalers like Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have produced tremendous results from their respective cloud platforms.
Amazon Web Services’ growth has reignited, and it just had its best quarter in more than four years. Microsoft is sitting on a $678 billion backlog for its Azure cloud platform, and Google Cloud delivered 82% year-over-year revenue growth in the second quarter.
When announcing Alphabet’s first quarter results, CEO Sundar Pichai told investors that the company’s “AI investments and full stack approach are lighting up every part of the business.”
That quote truly captures the returns AI investments have produced for the leading tech companies. It suggests that hyperscalers will continue to ramp up their capital investments, and Nvidia’s and Broadcom’s multiyear guidance supports that thesis.
It’s not just chipmakers and hyperscalers
I believe that to find the most exciting AI investment opportunities requires investors to look beyond chipmakers and hyperscalers. Their earnings reports offer a good idea of where the AI industry is heading. If chips continue to fly off the shelves and cloud backlogs continue to grow, AI spending and demand will continue to climb.
However, that’s not where I’m looking for investment opportunities. I prefer to find smaller companies that are responsible for different parts of AI infrastructure. For instance, each GPU requires memory chips. All of those chips also have to go inside data centers that have the necessary power, liquid cooling, and other components.
The deeper you go down this rabbit hole, the higher the returns you can potentially find. Neoclouds like Nebius (NASDAQ: NBIS) and Iren (NASDAQ: IREN) have my attention since they provide necessary compute capacity and power to hyperscalers.
Investors will continue to hear that artificial intelligence presents some of the best opportunities right now. It may sound boring since it has been the main headline on Wall Street for multiple years, but sometimes, the best opportunities are the most obvious ones.
Should you buy stock in Broadcom right now?
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Marc Guberti has positions in Broadcom and Iren. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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