Why the AI Cycle Means Broadcom Stock Has 25% Upside After the Recent Selloff

Broadcom stock has come back down to earth since hitting a record closing high on June 2. (Justin Sullivan/Getty Images)

Key Points

• BMO Capital Markets initiates coverage on Broadcom with an Outperform rating and a $455 price target, citing its role in custom chip design.
• Broadcom is in discussions with lenders to raise more than $60 billion in debt for an artificial-intelligence chip financing deal, says a report.
• Rival Marvell Technology issued a warrant to Google to purchase shares, potentially pressuring Broadcom as Google’s major chip partner.

Shares of Broadcom have slumped since hitting a record closing high in early June but Wall Street isn’t giving up on the chip designer as the artificial-intelligence spending cycle is again expected to propel the stock higher.

BMO Capital Markets analyst Harsh Kumar initiated coverage on Broadcom with an Outperform rating and a price target of $455. That price target represents 25% upside from the stock’s closing price on Thursday of $364.03.

Kumar is optimistic on Broadcom and the company’s crucial role in custom chip design for Alphabet and Meta Platforms . Broadcom also has chip supply deals with artificial-intelligence start-ups Anthropic and OpenAI.

Broadcom’s AI business grew 65% in 2025 and Kumar expects growth of 180% in 2026, suggesting sustainable growth and solid profitability.

The analyst added that Broadcom’s custom application-specific integrated circuits, known as ASICs is also poised for strong performance moving forward.

“Amid strong the AI capex cycle, AVGO’s custom ASIC business
has been delivering exceptional growth,” Kumar wrote.

The firm forecasts ASIC revenue to grow to $38 billion in 2026 up from $12.7 billion last year.

Broadcom stock rose 1.3% to $368.81 in premarket trading on Friday after ending Thursday up 0.4%. Shares enter the trading session on Friday down 7.4% for the week.

Broadcom also is in discussions with lenders to raise more than $60 billion in debt for an AI chip financing deal, Bloomberg reported Thursday.

The financing could include a junior debt tranche of around $30 billion and Broadcom would guarantee a part of a senior-secured tranche from $60 billion to $70 billion, according to the report.

Broadcom didn’t respond to a request for comment from Barron’s.

It’s been a rough patch lately for Broadcom stock. Shares closed at a record closing high of $481.57 on June 2, but have tumbled 24% since then.

The stock looked to be building momentum this month and on Aug. 7 closed at a recent high of $427.76. Shares, however, have only closed higher twice since then and have fallen 15% over that time frame.

That decline has brought shares below their 50-day moving average, around the $388 level, and their 200-day moving average at the $369 price level.

Adding insult to injury, rival Marvell Technology on Wednesday announced it has issued Alphabet-owned Google a warrant to purchase to 58.97 million shares of common stock, or to build a stake worth $12.19 billion.

Marvell issued the warrant as part of the two companies’ commercial agreement on the development of Google’s custom chips. The partnership covers large aspects of Google’s in-demand chips, including its tensor processing units, or TPUs.

This could potentially pressure Broadcom which has long been Google’s major chip partner. Broadcom announced in April a long-term agreement with Google to develop ​and supply custom artificial-intelligence chips through 2031.

Even with this potential pressure, BMO Capital Markets’ bullish view on Broadcom is shared broadly across Wall Street.

Of the 56 analysts polled by FactSet, Broadcom has an average Buy rating with a $534.42 price target.

Write to Kit Norton at kit.norton@barrons.com

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