Key Points
With 2026 nearing its end, investors should already be evaluating which AI stocks will lead the market in 2027. Institutional repositioning during December and January often triggers end-of-year and early-year rallies, making it strategic to identify opportunities before they gain momentum. Both Nvidia and Broadcom underperformed in 2026, presenting a compelling entry point ahead of a potential rebound.
While memory chip makers and infrastructure suppliers have thrived this year, Nvidia (NASDAQ: NVDA) rose roughly 17% and Broadcom (NASDAQ: AVGO) gained less than 5%, lagging the S&P 500’s approximately 11% return. Despite these modest gains, both stocks appear undervalued relative to their growth trajectory.
Image source: The Motley Fool.
AI hyperscaler capex is accelerating into 2027
AI hyperscalers do not ramp spending overnight; their multiyear capital allocation plans dictate massive procurement of compute infrastructure. While these spending forecasts remain private, Nvidia and Broadcom have access to them, giving both companies a unique planning advantage. During its Q2 earnings call, Nvidia guided for roughly 70% revenue growth in 2027, driven by surging hyperscaler demand and the launch of its next-generation Rubin architecture, which commands higher unit prices for improved performance. Broadcom projected its AI semiconductor revenue would double in both 2027 and 2028, signaling even more aggressive growth expectations.
Valuation sets up substantial upside
Using a reasonable long-term trailing P/E of around 30x and comparing it to forward earnings estimates reveals significant upside potential.
NVDA PE Ratio data by YCharts
NVDA PE Ratio (Forward 1y) data by YCharts
If both companies meet their earnings targets and re-rate to 30x trailing earnings by the end of next fiscal year, Broadcom could deliver over 50% upside and Nvidia more than 100% upside, positioning them among the strongest-performing AI stocks of 2027.