Broadcom Inc. (NASDAQ:AVGO) stock is down roughly 20% from its all-time highs in June, a pullback driven by a mix of lofty AI expectations, a high valuation multiple, broader market pressures, the Mediatek-driven narrative, and more recently, Marvell Technology Inc. (NASDAQ:MRVL). Despite the drop, TD Cowen analyst Joshua Buchalter recently reiterated a Buy rating on the stock with a $500.00 price target.
Why TD Cowen is Bullish
TD Cowen remains confident in Broadcom’s trajectory ahead of the print, and the numbers justify the optimism. Q2 2026 saw semiconductor revenue from AI of $10.8 billion growing 143% year-over-year, above the company’s forecast, backed by increasing demand for custom AI accelerators and AI networking.
The company forecasts semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion. Its massive $30 billion in AI semiconductor bookings is also a reflection of 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.
Risks Analysts are Watching
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%.