Broadcom‘s (NASDAQ: AVGO) stock price has doubled over the last 12 months, but Barclays thinks it still has more growth potential and it reinstated coverage with a $1,405 price target, or 13.5% above Tuesday’s closing price.

The networking infrastructure provider is benefiting tremendously from the strong demand for artificial intelligence (AI) solutions in servers. Revenue growth accelerated to 34% year over year last quarter following the acquisition of VMware, but it’s just getting started.

Why buy Broadcom stock

The shift to AI-enabled servers requires a lot of components to handle the massive data workloads. Nvidia has led the chip hardware market over the last year, but servers also need to upgrade networking infrastructure. Broadcom’s networking revenue, which makes up over a quarter of the business, grew 46% year over year last quarter.

Barclays and other analysts are most optimistic about Broadcom’s high-margin software business, which is offsetting the weak demand right now in the company’s broadband business. The infrastructure software segment posted revenue growth of 153% year over year last quarter, mostly driven by the addition of VMware.

Broadcom is known for growing free cash flow and paying a generous dividend to shareholders. The demand for its software solutions should boost the company’s free cash flow, and that’s why Barclays believes the stock can still hit new highs in the near term.

The stock trades at a higher valuation than a year ago when it traded at a cheap price-to-earnings ratio in the low teens. One reason to expect more limited gains going forward is the weak performance in the broadband business. However, robust AI demand and the company’s growing dividend should support the stock’s valuation. AI is certainly improving Broadcom’s long-term growth prospects.

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John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Barclays Plc and Broadcom. The Motley Fool has a disclosure policy.