The list of the world’s most prominent companies has undergone a paradigm shift in recent decades, a shift that has accelerated since early last year. Example: in 2004 General Electric And ExxonMobil were the largest companies in the world by market capitalization, valued at $319 billion and $283 billion respectively.
Now, just twenty years later, technology is king of the hill. Earlier this year, Microsoft became the most valuable company in the world, with a market capitalization of $3.2 trillion, dethroning Applecurrently worth $2.9 trillion. NvidiaThe company’s market capitalization has risen to $2.3 trillion, surpassing it Alphabet, AmazonAnd Metaplatformswith a sports market cap between $1.2 trillion and $2.2 trillion.
Eagle-eyed investors will have noticed the common theme that sets these tech titans apart: they are all leaders in artificial intelligence (AI).
With a market cap of around $650 billion (at the time of writing), that’s obvious Broadcom (NASDAQ:AVGO) is working to join this elite group of companies. Given its place in the semiconductor ecosystem and the rising demand for all things AI, the company could make the list sooner than you might think.
A chip from the old block
Broadcom is one of the world’s largest custom chip makers, but in addition to semiconductors, it also makes an extensive portfolio of products that support data centers, cloud computing, cybersecurity and AI. Products include networking, server storage, infrastructure, broadband, wireless and more. The company offers a wide range of network switching, routing, optical interconnect and Ethernet solutions, many of which will benefit from the rapid adoption of generative AI.
Additionally, Broadcom has faced headwinds due to the cyclicality inherent in some of its businesses, with wireless being a prime example. The business could get a boost if these segments recover.
Broadcom’s activities are picking up. In the first quarter, revenue rose 34% to $12.9 billion, while adjusted earnings per share (EPS) of $10.99 were 6% higher, although the recent VMWare acquisition weighed on the bottom line. Management expects full-year revenue to grow 40% to $50 billion.
The Road to $1 Trillion
Broadcom is in an enviable position in the AI ​​revolution. The company has an extensive portfolio of semiconductor solutions, many of which are essential components used for the AI ​​and hyperscale data centers where most AI lives.
According to Wall Street, Broadcom is poised to generate $50.39 billion in revenue by 2024, giving it a price-to-sales ratio (P/S) of around 12.9. Assuming the price-to-earnings ratio remains constant, Broadcom would need to grow its revenue to roughly $77 billion per year to support a market cap of $1 trillion.
Analysts currently predict revenue growth of 40% in 2024 and 14% in 2025. If the company hits these benchmarks and maintains a 14% growth rate in the years to come, it could reach a market cap of $1 trillion as early as 2028. Given that the AI ​​revolution is still young, these analyst estimates could ultimately be conservative – in which case this milestone could be reached sooner.
This could be just the beginning. Management noted that Broadcom’s software revenues rose 156% in the first quarter, while AI semiconductor revenues quadrupled. Management expects the company’s AI-related revenue to grow to over $10 billion by 2024, which would represent at least 20% of total revenue by the end of the year.
That’s not a big deal, considering the large and growing estimates for the AI ​​market. According to global management consulting firm McKinsey & Company, generative AI is expected to generate between $2.6 trillion and $4.4 trillion in revenue per year over the next decade. If the impact of embedded software is also included, these figures roughly double.
Finally, Broadcom, which trades at about 29 times forward earnings, fetches a slight premium compared to the S&P500‘s multiple of 28. However, given its robust growth and position in the AI ​​revolution, Broadcom investors are getting a lot of bang for their buck.
Should You Invest $1,000 in Broadcom Now?
Consider the following before buying shares in Broadcom:
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena holds positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
1 Unstoppable Stock That Could Join Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta Platforms in the $1 Trillion Club was originally published by The Motley Fool
