Broadcom Inc. (AVGO) Stock Down 20% from All-Time Highs

Broadcom Inc. (NASDAQ:AVGO) stock has experienced a significant decline of roughly 20% from its all-time highs in June, driven by a mix of factors including lofty AI expectations, a high valuation multiple, broader market pressures, the Mediatek-driven narrative, and more recently, Marvell Technology Inc. (NASDAQ:MRVL). Despite this drop, TD Cowen analyst Joshua Buchalter recently reiterated a Buy rating on the stock with a $500.00 price target.

The company’s AI semiconductor revenue has seen significant growth, reaching $10.8 billion in Q2 2026, a 143% year-over-year increase above the company’s forecast. This growth is backed by increasing demand for custom AI accelerators and AI networking. Broadcom forecasts semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion, with massive $30 billion in AI semiconductor bookings reflecting the intense demand for their AI solutions.

Management has reiterated its line of sight to more than $100 billion of fiscal 2027 AI semiconductor revenue, a figure that could see material upside if the roughly 10GW opportunity is deployed. This implies that even the $100b could prove conservative. The firm is also particularly confident about the trajectory of TPU, backed by Google’s capital expenditure commentary. Back in April, the company signed a long-term agreement with Google to develop and supply future generations of custom artificial intelligence chips and components for its next-generation AI racks through 2031.

Channel checks also seem to point to upside to Broadcom’s estimates despite Mediatek’s entry into the TPU program. Google was reportedly preparing to use Mediatek for a Tensor Processing Unit while retaining Broadcom, marking a strategic shift for the company where it diversifies its custom AI silicon away from relying exclusively on Broadcom.

However, Broadcom may be on the path to $100 billion, but there are some prominent headwinds. The most prominent one, despite channel checks pointing toward upside, is Mediatek’s entry into the TPU program as a competing design partner. The incremental softening of Meta Platforms, Inc. (NASDAQ:META)’s MTIA chip timeline last quarter remains another risk, coupled with uncertainty surrounding other projects like OpenAI’s ASIC. The timing remains unconfirmed for OpenAI’s program despite the multi-year collaboration agreement.

To make matters worse, Broadcom expects its Q3 consolidated gross margins to decline approximately 74%. As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. This decline in gross margin does not represent a structural change in semiconductor margin. Rather, it reflects product mix between semiconductors and infrastructure software.

Kirsten Spears, a Broadcom spokesperson, emphasized that the decline in gross margin does not signal a structural change in semiconductor margin. Instead, it reflects product mix between semiconductors and infrastructure software.

Competitive concerns have also intensified for AVGO after Google expanded its custom AI silicon partnership with Marvell Technology. The move may be a negative development for Broadcom as it breaks its near-monopoly over Google’s Tensor Processing Units (TPUs) and also introduces a rival into Google’s ecosystem.

Wall Street sentiment remains largely in favor of the stock, with institutional interest seemingly on the rise. According to Insider Monkey’s database, 173 hedge funds held stakes in Broadcom at the end of the first quarter of 2026, modestly down from 202 in the prior quarter. As for short interest, bears show limited skepticism towards the stock, with just 1.31% of Broadcom’s public float sold short.

The company reports fiscal Q3 results on September 2, expecting consolidated revenue to increase 84% year-over-year to $29.4 billion, AI semiconductor revenue to reach $16 billion, and a non-GAAP operating margin of 67%. TD Cowen’s rating reflects that Broadcom’s pullback from all-time highs does not materially weaken its long-term AI thesis. Its growing AI semiconductor revenue and expected deployments support its bull case, but it has to prove that its expanding pipeline can translate into sustained revenue and market-share gains.