The data center and semiconductor specialist just provided the clearest evidence yet that the adoption of artificial intelligence (AI) continues to gain steam.
The past few years have been a wild ride for Nvidia (NVDA 3.30%) investors. The company’s graphics processing units (GPUs) played a crucial role in recent advances in artificial intelligence (AI) and have become the gold standard for AI training and inference.
The resulting unprecedented demand for its chips sparked a surge in the company’s sales and profits, sending its stock price to new heights. It currently reigns as the world’s most valuable company by market cap, valued at $4.3 trillion (as of this writing), and most experts believe AI adoption will continue to climb over the long term.
In recent months, however, the buzz has begun to fade. Shareholders are looking for confirmation that the AI investment cycle will yield tangible returns. Add to that the talk of an AI bubble, and it’s easy to see why investors are edgy.
Broadcom (AVGO 11.58%) just provided the clearest evidence yet that demand for AI remains robust.
Image source: Nvidia.
Blockbuster results
Broadcom announced the results of its 2025 fiscal fourth quarter (ended Nov. 2), and the results exceeded expectations by a wide margin. Record revenue of $18.01 billion climbed 28% year over year, fueling adjusted earnings per share (EPS) of $1.95, which jumped 37%.
For context, analysts’ consensus estimates called for revenue of $17.46 billion and adjusted EPS of $1.87, so Broadcom easily surpassed expectations.
Continuing demand for AI solutions fueled the company’s impressive results, as AI-based revenue surged 74% year over year, marking the 11th consecutive quarter of AI-centric growth. Free cash flow was also robust, clocking in at $7.47 billion, or 41% of revenue.
Broadcom gave investors other reasons to be of good cheer. CEO Hock Tan revealed that Anthropic was the mystery customer behind the $10 billion backlog increase in Q3. He also noted that the AI start-up had placed an additional $11 billion chip order, which is due to be filled by late next year.
Despite filling a barrage of orders to generate its record revenue, Broadcom’s backlog still stands at $73 billion. Tan also noted that the company added a fifth customer for its custom AI chips, with a $1 billion order for delivery in late 2026.
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The chief executive also provided a robust first-quarter outlook, guiding for revenue of $19.1 billion, an increase of 28% compared to the prior-year quarter. For context, analysts’ consensus estimates were calling for Q4 revenue of $18.31 billion. However, given the company’s tendency to underpromise and overdeliver, these numbers are likely conservative. Tan went on to say that he expects the momentum to continue, driving revenue from AI accelerators and Ethernet switches to double year over year to $8.2 billion.
A “Broad”er implications
While the results are undoubtedly positive for Broadcom investors, it’s worth taking a step back, lest we miss the forest for the trees. While it’s worth keeping an eye out for an AI-related slowdown is worth considering, these accelerating results indicate these concerns are unjustified, at least for now.
Broadcom’s accelerating results also add weight to Nvidia’s quarterly report, corroborating CEO Jensen Huang’s assertion during the company’s earnings call that “AI has reached a tipping point.” He also noted that while there’s been talk of an AI bubble, “From our vantage point, we see something very different.”
Huang estimates that AI-fueled data center spending will ramp to between $3 trillion and $4 trillion by the end of the decade. To provide context, for Nvidia’s fiscal year, which ends in January, Wall Street is expecting revenue of $213 billion. This helps to illustrate the massive opportunity that remains.
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Furthermore, Broadcom noted that the majority of its increasing backlog resulted from growing demand from its existing hyperscale customers, as the major cloud infrastructure providers are boosting capital expenditures (capex). To that end, Tan said (emphasis mine), “We see the spending momentum by our customers for AI continuing to accelerate in 2026.”
That accelerating demand, by extension, bodes well for Nvidia. Its chip still dominate, controlling 92% of the data center GPU market, according to IoT Analytics. Most experts agree that as AI adoption moves downstream, the need for the necessary processors will increase. As the industry standard, Nvidia’s GPUs will still be in high demand.
Despite recent weakness, Nvidia stock has still soared more than 1,100% since the advent of AI in early 2023 (as of this writing). Furthermore, both Nvidia and Broadcom continue to put up stunning growth numbers, despite the suggestion that AI growth is slowing.
For investors looking to start or increase a position, Nvidia stock is currently selling for just 24 times next year’s expected earnings, an attractive price to pay for a company on track to increase revenue by 77% this fiscal year and 37% in fiscal 2027.
Given Nvidia’s significant market share, track record of innovation, and first-mover advantage, I’d argue the company is well-positioned to continue to benefit from the accelerating adoption of AI.
Furthermore, given that Broadcom is selling for 29 times next year’s earnings, it’s on my hot list as well.
