Broadcom Is Sitting at $370 and Wall Street Suddenly Has Doubts About Its AI Business
Broadcom's AI revenue has nearly doubled in a single quarter, yet the stock sits 25% below its summer peak as long-dated options signal that big money is bracing for something to go wrong before the critical December earnings report.
Broadcom (NASDAQ:AVGO | AVGO Price Prediction) at $367.24 looks compelling after the pullback from June’s $495 peak has created a compelling entry point into the most differentiated custom silicon franchise in AI. The stock sits roughly a quarter below its summer high even after fiscal Q3 results that beat consensus and showed AI semiconductor revenue up 221% year over year to $16.70 billion.
Broadcom designs custom AI accelerators and high-speed networking silicon for Google, Meta, OpenAI, and Anthropic, and it operates a large infrastructure software business anchored by VMware. The combination has grown the company to a $1.75 trillion market capitalization. The September pullback compressed valuation right as management raised the AI outlook again.
Silicon and Networking Moats Fund the Runway
The upside case starts with scale and lock-in. Q4 AI semiconductor guidance calls for $21.7 billion, up 236% year over year, and management reaffirmed a fiscal 2028 AI revenue outlook of $230 billion. Hock Tan said the company is “very much on target to exceed $30” in earnings per share by fiscal 2028.
Anthropic is anchored by a $35 billion first tranche closed in June, with line of sight to 10 gigawatts in 2028. OpenAI is deploying 1.3 gigawatts of Jalapeno in 2027. Per the writer’s thesis, structural moats in Custom AI Silicon and Data Center Networking Switches create multi-year commitments and high switching costs that rivals would need years to displace.
Customer Concentration and Margin Compression
AI revenue is anchored to six XPU customers, with four driving the bulk of demand. Any pause in hyperscaler capex hits a company where AI now represents 56% of revenue.
Gross margin fell 210 basis points sequentially in Q3 as XPU and HBM content increased, and Q4 consolidated gross margin is guided to approximately 73%, down from 78% a year ago. Add contingent residual-value guarantees tied to the Apollo/Blackstone AI XPV platform, and skeptics have a legitimate question about how much growth is being underwritten by Broadcom’s own balance sheet.
Reasons to Wait for the December Earnings Report
The stock fell 12.18% in the past month even as guidance moved higher. Reddit sentiment turned very bearish in early August around OpenAI funding math before rotating bullish again into earnings.
Options data shows a full-chain put/call ratio of 0.66, but longer-dated 2027 and 2028 tenors sit well above 1.0, including 2.54 for September 2027. Waiting for the December 9, 2026 Q4 report would clarify whether the $115 billion fiscal 2027 AI revenue target holds as supply and data-center build timing collide.
Where the Numbers Land Right Now
Broadcom currently trades at $367.24. Shares are up 6.5% year to date and 24.04% over the past year, versus 12.21% and 19.51% for the S&P 500. Over the past month AVGO fell 6.37% while SPY gained 0.99%.
Consensus from 44 analysts puts fiscal 2026 EPS at $11.6260, rising to $19.5323 for fiscal 2027 across 46 analysts. Estimates have drifted higher over the past 90 days, though individual analyst targets are one data point and should not be treated as guarantees.
Why $367 Marks a Notable Setup
At $367.24, Broadcom sits at a notable setup. Here is why.
The path to appreciation runs through the December 9, 2026 Q4 report. If AI semiconductor revenue lands at or above the guided $21.7 billion and fiscal 2027 tracks toward $115 billion, forward earnings power supports a materially higher multiple. Buying at $367 puts investors in at pre-June prices while the AI revenue base has nearly doubled sequentially in a single quarter.
The risk/reward is asymmetric because the moats are real. SerDes leadership, advanced packaging, and Tomahawk 6 networking dominance across nearly every AI hyperscaler take years to replicate. Google’s TPU commitment alone runs into “multi-tens of billions of dollars” annually. Reuters reported this week that Broadcom raised its AI chip forecast as Big Tech kept writing bigger checks, reinforcing that the demand curve is intact.
Watch gross margin trends, Anthropic and OpenAI deployment cadence, and any hint of customer defection. A break below $340 without a fundamental catalyst would force a reassessment. For patient capital willing to sit through gross-margin dilution and short-term noise, the discount at $367 reflects the skepticism Wall Street’s doubts have created.
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Alex Sirois is a financial writer with experience spanning both retail and institutional investing. He has written for InvestorPlace and held roles at BNY Mellon and Bernstein, giving him a perspective that bridges Main Street portfolios and Wall Street analysis.
Alex holds an MBA from George Washington University and has built his career across multiple industries, including e-commerce, education, and translation — a breadth of experience that informs how he breaks down complex financial topics for everyday investors. His writing is conversational, actionable, and grounded in long-term, buy-and-hold investing principles.
At 247 Wall St., Alex focuses on delivering analysis that is both accessible and useful, with a clear emphasis on helping readers make more informed decisions with their money.
