There are plenty of great AI stocks to choose from these days, but not all of them offer the same long-term opportunities or take advantage of artificial intelligence (AI) trends. broadcom (AVGO +0.01%). Nor do they pay a growing dividend, as the company also does.
Broadcom is benefiting from two big AI trends, including increased data center demand and the shift toward customized processors by big tech companies.
And it’s possible that Broadcom’s impressive performance isn’t done yet. here’s why.
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How Broadcom is catching two big AI tailwinds
AI is a huge market, so let’s narrow down how to accurately scale it broadcom It’s profitable. First, there is a growing demand for its custom AI processors by major tech companies to customize their AI systems.
Broadcom’s processors can be designed specifically with a technology company’s larger language models in mind, making them more efficient and enhancing performance. The gains helped its custom AI application-specific integrated circuits (ASICs) grow sales by 140% in the first quarter of 2026, thanks to the expansion of deals. alphabet, metaAnthropic, and OpenAI.
The chip maker recently announced that it has extended its partnership with Alphabet’s Google, enabling Broadcom to design Google’s tensor processing units (TPUs) and supply networking components through 2031.
Broadcom’s AI-specific semiconductor revenue more than doubled in the first quarter to $8.4 billion, accounting for about 43% of its total revenue. More good days are ahead as management estimates its AI chip revenues will reach $100 billion by 2027.
today’s change
(0.01%) $0.03
current price
$414.60
key data points
market cap
$2.0T
day limit
$410.21 -$419.78
52wk range
$231.13 -$442.36
volume
585.5K
average volume
23.8m
gross margin
64.96%
dividend yield
0.60%
And this isn’t the only AI trend benefiting business. The company’s networking systems – primarily through its popular Tomahawk switches for data centers – are also experiencing a surge in demand as hundreds of billions of dollars are invested in data center expansion.
Broadcom’s AI networking revenue jumped 60% in the most recent quarter to $2.8 billion — nearly a third of all the company’s AI sales. And management believes it will continue to expand, with networking sales making up 40% of AI revenue in the second quarter.
Growing dividends aren’t half bad
high growth ai stock These aren’t typically companies you’d expect to pay dividends, which is one of the ways Broadcom is unique.
The company returned $3.1 billion to shareholders in the first quarter — or $0.65 per share — and has a history of increasing its dividend. It has increased it annually for 15 consecutive years. Management also repurchased $7.8 billion of shares in the quarter and authorized a repurchase program of an additional $10 billion through 2026.
While many AI companies are focusing on reinvesting earnings instead of research and development (R&D) paying dividends, Broadcom’s high profitability and growing revenues allow it to do both.
The company ended the first quarter with $14.2 billion in cash and cash equivalents and achieved a consolidated gross margin of 77%. Cash and high profitability make it easy for Broadcom to return cash to shareholders, while still investing $1.5 billion in R&D this quarter.
Okay, okay, there’s one thing I don’t like
It probably won’t come as a surprise that Broadcom stock isn’t exactly cheap right now. Most AI stocks are not.
After its shares surged 79% in the past year, its trailing price-to-earnings ratio (P/E) of about 81 is significantly higher than the tech sector’s average P/E of 36.
Still, with Broadcom clearly harnessing established – and very profitable – AI trends and securing new deals that will help it maintain its current momentum, investors probably won’t regret adding anything. broadcom stock For their portfolio. And the company’s rising dividend is the icing on the cake.