AVGO and TSM: The Custom Silicon Stocks Powering AI

Oct 28, 2026

Bobby Quant Team

💡 Key Takeaway

Broadcom and TSMC are key beneficiaries of the AI custom silicon boom, with strong growth and dominant market positions, making them attractive long-term investments despite valuation concerns.

The Rise of Custom Silicon

Broadcom and Taiwan Semiconductor Manufacturing (TSMC) have emerged as leading players in the custom silicon space, powering the AI infrastructure supercycle. Broadcom designs custom ASICs (Application-Specific Integrated Circuits) for tech giants like Alphabet, Meta, OpenAI, and Anthropic, while TSMC manufactures these advanced chips, controlling over 90% of the high-end AI semiconductor market.

Broadcom's AI semiconductor revenue surged 221% year-over-year to $16.7 billion in Q3, with net income up 216% to $13.1 billion. The company expects AI revenue to grow 236% annually to $21.7 billion in Q4. Over the past 15 years, Broadcom has delivered a total return of 13,470%, turning a $25,000 investment into $3.4 million.

TSMC, as the go-to manufacturer for high-end ASICs from Broadcom, Marvell, and others, has also delivered stellar returns. Its stock has returned 4,720% over 15 years, turning $25,000 into $1.2 million. Both companies have seen recent valuation pullbacks amid AI bubble concerns, but their strong fundamentals and dominant positions remain intact.

Broadcom trades at roughly 28 times forward earnings and 15 times sales, while TSMC's valuation is also elevated but supported by its market dominance and strong demand trends. The custom silicon market is expected to continue growing as AI models become more specialized and demand for efficient computing rises.

What This Means for Me

If you hold AVGO or TSM, this news reinforces the long-term growth story, but be prepared for volatility given elevated valuations. Investors with exposure to the semiconductor sector should consider adding these names on pullbacks, as they are well-positioned to benefit from the AI infrastructure supercycle. Those without exposure may want to initiate positions for diversification into AI hardware.

Why This Matters for Investors

The AI infrastructure supercycle is driving massive demand for custom silicon, and Broadcom and TSMC are at the forefront. Broadcom's custom ASICs offer efficiency gains over general-purpose GPUs for specific AI tasks, making them increasingly attractive to hyperscalers. This has translated into explosive revenue growth and strong margins for Broadcom.

TSMC's dominance in advanced chip manufacturing makes it a critical bottleneck and beneficiary of the AI boom. As the primary foundry for high-end AI chips, TSMC is a pick-and-shovel play that benefits regardless of which chip designer wins. Its market share and technological leadership provide a wide moat.

Both stocks have delivered life-changing returns over the past 15 years, and the AI supercycle could fuel further gains. However, valuations are elevated, and any slowdown in AI spending could lead to volatility. Investors should consider these risks but also recognize the long-term growth potential.

For those looking to gain exposure to the custom silicon trend, AVGO and TSM offer compelling opportunities. Broadcom provides direct exposure to custom ASIC design and AI networking, while TSMC offers exposure to the entire advanced semiconductor manufacturing ecosystem.

Stock to Watch

Stocks	Impact	Analysis
AVGO	Positive	Broadcom is a leading custom ASIC designer with explosive AI revenue growth and a strong customer base including Alphabet, Meta, OpenAI, and Anthropic.

Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.