Prediction: This Top Artificial Intelligence (AI) Stock Will Start Skyrocketing After March 6

Semiconductor bellwether Broadcom (NASDAQ: AVGO) has clocked impressive gains of 69% on the stock market in the past year as of this writing, but it has witnessed an indifferent start in 2025.

Broadcom stock fell big time last month after Chinese artificial intelligence (AI) start-up DeepSeek claimed that it had developed a competent AI model at an incredibly low cost, calling into question the billions of dollars that are being spent by many tech giants to build out their AI infrastructure. As Broadcom has been a beneficiary of the huge AI infrastructure spending, its shares crashed significantly following DeepSeek's revelation.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

It is worth noting that Broadcom has clawed back a nice chunk of those losses, though the stock is still down 6% in 2025. However, the chip designer's upcoming fiscal 2025 first-quarter results, scheduled for release on March 6, could give it a nice shot in the arm. Let's see why.

AI spending could help Broadcom deliver stronger results and outlook

Broadcom's impressive rally in the past year has been driven by the healthy demand for its application-specific integrated circuits (ASICs). The company pointed out on its December 2024 earnings conference call that its custom AI chips are being used by three major cloud hyperscale customers for tackling AI workloads. Shipments of custom processors to these customers doubled in the fourth quarter of fiscal 2024, while there was a 4x jump in shipments of Broadcom's networking equipment used in AI servers.

Even better, Broadcom reports that it has been chosen to supply its next-generation custom AI processors for two additional cloud hyperscalers. Reports suggest that the three big cloud computing companies currently using Broadcom's chips are Alphabet, Meta Platforms, and TikTok parent ByteDance.

More importantly, two of those companies are set to increase their capital spending substantially in 2025 to support the rollout of AI infrastructure. Alphabet, for instance, is forecasting an increase of almost $23 billion in capital expenditure this year, while Meta's capex could rise by a remarkable 60% to $65 billion.

The new customers that Broadcom talked about on its previous conference call could be Apple and OpenAI. According to a Reuters report, OpenAI is reportedly looking to reduce its reliance on Nvidia's graphics cards for tackling its AI workloads. It has reportedly partnered with Broadcom to design its custom in-house AI chip.

Another report suggests that consumer electronics giant Apple is also working with Broadcom to develop an AI server chip. Meanwhile, Broadcom may have won more business from Apple for providing radio frequency components used in iPhones, as the latter has reportedly started dual-sourcing those chips instead of buying them solely from another chipmaker -- Skyworks Solutions.

Skyworks management admitted on the latest earnings conference call that it could witness a 20% to 25% decline in content at its largest customer, and that could be good news for Broadcom investors, as per Wall Street analysts. As such, there are multiple reasons why the chipmaker could be on track to beat consensus expectations once again and issue robust guidance as well.

The company has guided for $14.6 billion in revenue for the first quarter of fiscal 2025, which would be a 22% increase from the year-ago period. Its earnings are forecast to jump by a solid 37% year over year to $1.51 per share. However, the new business that Broadcom is likely to have landed of late could help it exceed its guidance, and that could send the stock soaring following its upcoming earnings report.

More importantly, Broadcom's AI business is likely to take off remarkably over the next three years, which is why it makes sense to buy this AI stock before it starts heading higher.

The bigger picture points toward better times ahead

Broadcom generated $12.2 billion from sales of AI chips in the previous fiscal year. While the company hasn't issued a forecast for fiscal 2025 yet, investors can expect this figure to head substantially higher over the next three years as the company sees its addressable opportunity in custom AI processors and networking chips rising to a range of $60 billion to $90 billion by fiscal 2027.

Given that Broadcom controls an estimated 55% to 60% of the custom chip market, it is in pole position to make the most of the lucrative multibillion-dollar opportunity. Not surprisingly, Broadcom carries a price/earnings-to-growth ratio (PEG ratio) of just 0.62 based on the five-year earnings growth that it is expected to deliver, as per Yahoo! Finance.

A PEG ratio is a forward-looking valuation metric that takes into account a company's long-term earnings growth potential. A reading of less than 1 means that the particular stock is undervalued with respect to the growth that it could clock. So, investors can buy Broadcom at an attractive level right now, and they may not want to miss this opportunity, considering that its next earnings report could send it on a bull run.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $340,411!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,570!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $533,931!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of February 24, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom and Skyworks Solutions. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.