Broadcom Inc.

🇺🇸NASDAQ Global Select
Back to all articles
Broadcom Inc. stock analysis AVGO overview
Bullish +55

Broadcom stock crashed 24% but here's why analysts are not walking away

📉 Broadcom stock dropped roughly 24% from its $495 peak following fiscal Q2 earnings, with shares retreating significantly despite strong operational results.

💰 The company reported record revenue of $22.2 billion and adjusted earnings of $2.44 per share for the quarter.

🤖 AI semiconductor revenue surged 143% year-over-year to reach $10.8 billion, highlighting rapid growth in the high-margin segment.

⚠️ Q3 guidance for AI chip revenue came in below the ~$17 billion market expectation, triggering a negative price reaction.

🎯 CEO Hock Tan reiterated the long-term target of over $100 billion in AI sales by fiscal 2027 but did not raise it further.

📦 Backlog remains robust with bookings exceeding $30 billion against only $10.8 billion shipped in the quarter.

🤝 Major customers including Anthropic, OpenAI, and Meta have committed to gigawatt-scale AI chip purchases.

🚀 Management raised its 2027 shipping expectation to over 10 gigawatts of AI chips, slightly above previous views.

📈 JPMorgan maintains an Overweight rating with a $580 price target, advising clients to be aggressive buyers at current levels.

🏛️ Wall Street consensus remains heavily bullish with dozens of Buy ratings and average price targets above $500.

⚖️ CFO Kirsten Spears warns of potential margin pressure as AI hardware mix expands relative to higher-margin software.

🔄 The selloff extended to peers like Nvidia, AMD, and Intel as investors questioned if AI valuations had run too far.

🔍 Google may diversify TPU suppliers over time, though Broadcom remains central to its custom chip roadmap.

📉 Trading volume surged during the decline, indicating a panic-style reset rather than a slow reassessment of fundamentals.

Bullish Signals
  • Broadcom achieved record revenue of $22.2 billion and adjusted earnings of $2.44 per share in fiscal Q2.
  • AI semiconductor sales jumped 143% year-over-year to $10.8 billion, demonstrating explosive growth in the key AI segment.
  • The company holds a massive backlog with bookings over $30 billion compared to only $10.8 billion shipped, signaling strong future visibility.
  • Major AI customers including Anthropic, OpenAI, and Meta have committed to gigawatt-scale chip commitments.
  • Management raised its 2027 shipping expectation to over 10 gigawatts of AI chips, slightly above prior guidance.
  • JPMorgan reiterated an Overweight rating with a $580 price target, explicitly advising clients to be aggressive buyers at current levels.
  • The broader analyst consensus remains heavily bullish with dozens of Buy ratings and no Sells, averaging price targets above $500.
Risk Factors
  • Q3 guidance for AI chip revenue came in below the roughly $17 billion market expectation, causing a sharp stock decline.
  • CEO Hock Tan did not raise the long-term AI sales target beyond the existing goal of over $100 billion by fiscal 2027.
  • CFO Kirsten Spears has flagged potential margin pressure as AI hardware becomes a larger portion of revenue compared to software.
  • There is a risk that major customers like Google may diversify their TPU suppliers over time, potentially reducing Broadcom's market share.
  • The stock fell 24% from its record high, leaving it significantly below previous peaks despite strong underlying fundamentals.
Full Analysis
Broadcom (NASDAQ: AVGO) shares fell approximately 24% from their record high of around $495 following its fiscal second-quarter earnings report. While the company delivered record revenue of $22.2 billion and adjusted earnings of $2.44 per share, driven by a 143% surge in AI semiconductor sales to $10.8 billion, the stock price reacted negatively to specific guidance updates. The primary catalyst for the selloff was management's guidance for fiscal third-quarter AI chip revenue, which came in below the roughly $17 billion investors had anticipated. Additionally, CEO Hock Tan did not raise the company's long-term target of over $100 billion in AI chip sales by fiscal 2027, a move interpreted by the market as insufficient optimism despite management describing demand for XPUs and networking as 'insatiable'. Analysts remain largely bullish on the stock, with JPMorgan maintaining an Overweight rating and a $580 price target, suggesting the decline represents a panic-style reset rather than a fundamental collapse in AI demand. The company reported over $30 billion in bookings versus only $10.8 billion shipped, indicating significant backlog. However, risks persist regarding potential margin compression as AI hardware becomes a larger portion of revenue and the possibility that major customers like Google may diversify their TPU suppliers.