Dear Friend,

A drilling crew near the Grand Canyon just confirmed what the International Energy Agency calls one of the largest energy resources ever measured.

Enough to meet global electricity demand 140 times over.

Not 140 percent. One hundred and forty times.

Everyone knew the energy was there. Reaching it was the problem - miles of solid rock.

That changed last year.

A crew drilled nearly three miles down in 16 days.

The Department of Energy said it would take 64.

They weren't after oil.

They were after the heat.

Google already signed a 15-year deal. Bill Gates wrote a $100 million check. And on July 4th, Washington hands this resource an edge no other energy source has.

One company sits at the center.

See the company behind the Grand Canyon discovery >>

“The Buck Stops Here,”
Kelly Maguire
Behind the Markets

VMware: Broadcom's Second Biggest Business Set to Accelerate

Submitted by Leo Miller. Article Published: 6/19/2026.

For good reason, investors have come to see Broadcom (NASDAQ: AVGO) as a clear leader in the artificial intelligence semiconductor market. The company’s AI semiconductor revenue jumped 143% year-over-year (YOY) in its latest quarter to $10.8 billion, or 49% of total sales. Notably, Broadcom still trails NVIDIA (NASDAQ: NVDA) by a wide margin, whose data center revenue came in at an astonishing $75.2 billion.

Even so, Broadcom remains well ahead of other AI chip companies like Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC). Broadcom’s AI chip revenue was $5 billion higher than AMD’s Q1 2026 data center sales of $5.8 billion. Meanwhile, AI chip sales were more than double Intel’s Data Center and AI (DCAI) revenue of $5.1 billion. Broadcom expects another sharp acceleration next quarter, guiding for AI semiconductor growth of more than 200% YOY to $16 billion.

However, one key part of Broadcom’s business can sometimes get overlooked amid the intense focus on AI chips. That business is infrastructure software, anchored by VMware. For investors, this is an important part of Broadcom’s story to understand, as AI is far from the only area where the company expects growth.

Infrastructure Software: A Large Chunk of Broadcom’s Business

Broadcom’s revenue breakdown shows why infrastructure software is a key part of its business and why investors need to keep it on their radar. In its Q2 fiscal year 2026 (FY2026), infrastructure software generated $7.2 billion in revenue. That represented a very significant 32% of its $22.2 billion in total revenue. (Note that Broadcom’s fiscal reporting period is slightly ahead of the standard reporting period used by many companies.)

Still, all eyes are on AI chips, since this is where Broadcom is generating the vast majority of its growth. For perspective, infrastructure software revenue grew just 1% YOY two quarters ago and 9% YOY last quarter.

As a result, this segment’s growth has slowed considerably compared with fiscal year 2025, when infrastructure software sales posted impressive growth of 26% YOY. This was largely due to the extensive price increases Broadcom implemented after acquiring VMware. Given this dynamic, some investors have argued that Broadcom has exhausted its price-increase-driven growth and that software sales may stagnate again. However, Broadcom’s latest commentary strongly pushed back on that view.

Broadcom Forecasts Highest Software Growth in Over a Year

In Q3 FY2026, Broadcom expects a meaningful reacceleration in software growth. The company projects sales of $8.9 billion, or an increase of 31% YOY. Notably, this would mark the company’s fastest software growth rate since the beginning of 2025.

Even more telling were CEO Hock Tan’s comments about software going forward. Tan said, “As you can see, in Q3, we're seeing an accelerated growth, and we expect that to continue, I guess, for the next multiple quarters as this demand picks up.” It is unclear whether Tan expects growth to accelerate beyond 31% in the future. However, at the very least, he is pointing to much stronger growth than the recent single-digit figures.

Tan also gave a notably confident answer to the one analyst question specifically focused on software. Citigroup analyst Atif Malik asked, “Are you guys seeing any impact of AI, agentic AI, on your software growth and renewals? And if you can just talk about some sort of long-term growth for that business.”

The question gets at a concern that has shaken many software stocks: AI-driven disruption. Tan responded, “Well, we're not seeing it… We do not expect to see any impact on software products.” In other words, Tan said he is not seeing a negative impact from AI on software sales and does not expect one going forward. Much of this confidence stems from VMware's tight integration with computing hardware. VMware helps manage the allocation of computing resources, making it difficult to displace. In addition, the rise of AI requires more computing resources, which should increase the importance of managing those resources—the exact service VMware provides.

Broadcom’s Software Segment: A Solid Supplement to Hyper-Growth AI Chips

Broadcom’s software business is not only large, but the company also expects it to grow strongly going forward. Meanwhile, there are solid reasons to believe that AI is a positive for the software business rather than a clear threat. To top it all off, this segment is extremely profitable. It generated a gross margin of 93% last quarter, and the operating margin rose 310 basis points YOY to 79%. Overall, Broadcom’s undeniably strong AI semiconductor business is far from the only reason to be confident in the stock’s outlook.