Harsh Chauhan, The Motley Fool

Tue, Jun 3, 2025, 3:45 AM6 min read

• Share prices of Broadcom and Lam Research registered impressive gains in the past month.

• The lucrative end markets the companies serve should allow them to sustain their healthy growth rates.

• Both stocks trade at attractive valuations, making them ideal for investors looking to add AI stocks to their portfolios.

• 10 stocks we like better than Broadcom ›

Artificial intelligence (AI) is set to play a key role in driving global economic growth in the long run. The evolving technology is expected to boost productivity, create new revenue streams, and facilitate innovation.

Market research firm IDC, for instance, forecasts that in 2030, each dollar spent on AI-related services will generate $4.60 in value. And a report from the United Nations Trade and Development office suggests that the AI market could surge in value by 25x over the next decade, generating a whopping $4.8 trillion in revenue in 2033.

With that in mind, it won't be surprising to see organizations and governments investing far more money in AI-focused hardware and software to become more productive and efficient. That's why investors would do well to take a closer look at a couple of names that are playing central roles in the proliferation of AI.

Broadcom (NASDAQ: AVGO) makes specialized application-specific integrated circuits (ASICs) and networking chips used in data centers, and demand for its processors has taken off thanks to the proliferation of AI systems. Several cloud computing giants have been deploying Broadcom's custom AI processors to lower the costs of AI training and inference, and to reduce their reliance on expensive graphics processing units (GPUs) from Nvidia.

ASICs are custom AI processors built to perform specific tasks, allowing them to deliver more computing power with lower energy consumption when compared to general-purpose GPUs. The advantages of custom AI processors make them ideal for large-scale deployment in data centers and are precisely the reason why Broadcom's AI business is taking off.

Currently, three hyperscale cloud customers use Broadcom's custom accelerators in large AI data centers to develop next-generation models. The chipmaker is deeply engaged with these customers to develop even more advanced custom processors and networking chips to support their product roadmaps for the next three years.

In Broadcom's view, these three hyperscalers alone should create a serviceable addressable market (SAM) worth $60 billion to $90 billion for it by fiscal 2027. The company's AI revenue jumped by 77% year over year in the first quarter of its fiscal 2025 to $4.1 billion, so it is currently clocking a more than $16 billion annual run rate.