The tech sector’s unmistakable need for Broadcom’s chips and ancillary products — which are critical components in data center operations — gives it an important role to play in the AI revolution. This position will help fuel its next phase of growth.

According to Wall Street’s consensus estimate, Broadcom will generate revenue of $51.67 billion in 2024, giving it a forward price-to-sales (P/S) ratio of almost 16. If the stock’s P/S remains constant from here, it will need to generate sales of roughly $64 billion annually to support a $1 trillion market cap.

Analysts’ consensus estimates are for revenue growth of 44% in 2024 and 17% in 2025. If the company hits those targets, it could achieve a $1 trillion market cap as soon as 2026. However, it’s important to note that estimates regarding the outlook for the AI industry tend to ebb and flow, so how well these forecasts match reality could be impacted by the actual rate of the technology’s adoption.

That said, based on the information we have right now, Broadcom could join the fraternity of trillion-dollar companies sooner than later. Management cited AI as one of the driving factors in its fiscal third-quarter success, citing “strong demand from hyperscalers for both AI networking and custom AI accelerators.” Recent commentary from the world’s largest cloud infrastructure providers suggests that demand is poised to continue.

Estimates regarding the future market for generative AI continue to ratchet higher. The economic impact of the technology is expected to be between $2.6 trillion and $4.4 trillion annually over the coming decade, according to global management consulting firm McKinsey & Company. Its report noted that the estimate effectively doubles if it includes the impact of embedding generative AI into software.

Broadcom’s strong results have fueled a surge in the stock price, yet it’s still attractively valued at 28 times forward earnings, compared to a multiple of 30 for the S&P 500.

However, Broadcom’s stock has gained 11,210% since 2009, compared to just 447% for the S&P, which helps illustrate why the premium is warranted.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. 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. Danny Vena has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and GE Aerospace and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Meet the Stock-Split Stock That Soared by 11,210% Over the Past 15 Years. Now, It’s Poised to Join Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla in the $1 Trillion Club by 2026 was originally published by The Motley Fool