Key Takeaways
-
Broadcom’s shares showed little movement after another strong quarterly report, even as AI semiconductor revenue accelerated sharply.
-
Management expects AI chip revenue to grow faster in fiscal Q4 and reach $230 billion by fiscal 2028.
-
At roughly 12 times its fiscal 2028 earnings-per-share target, the stock trades at a discount to several high-growth semiconductor peers.
A $1,000 investment in Broadcom (NASDAQ: AVGO) on Sept. 8, 2025, would have been worth $1,070 at the Sept. 8, 2026, market close, including dividends.
That return understates the momentum inside the company. In its fiscal third-quarter earnings release on Sept. 2, 2026, Broadcom said AI semiconductor revenue jumped 221% from a year earlier to $16.7 billion.
Even after that growth, shares trade at approximately 12 times management’s fiscal 2028 earnings target, creating an appealing setup if AI revenue continues to outpace expectations.
Image source: Getty Images.
Broadcom expects AI chip sales to accelerate
“Demand for our custom AI accelerators and networking remains very strong,” President and CEO Hock Tan said in the Sept. 2 release. “Momentum is continuing in Q4, and we expect AI semiconductor revenue to accelerate to $21.7 billion, up 236% year over year.”
One explanation for the stock’s muted reaction was that some investors wanted a stronger revenue outlook. Broadcom forecast $34.8 billion in total revenue for fiscal Q4, slightly below expectations of $35 billion or more. Higher memory costs are also pressuring gross margin.
At a broader level, Broadcom sits near the center of the historic data-center spending boom. It designs Google’s Tensor Processing Units and expects to begin shipping Ironwood TPU version 7 to Anthropic in the fourth quarter.
Broadcom is also the design partner for OpenAI’s custom AI inference chip, Jalapeno, and Meta Platforms’ MTIA accelerator for inference and recommendation systems. Those relationships are contributing to the company’s rapid AI revenue growth.
During the fiscal Q3 call, Tan said Broadcom plans to deliver “tens of billions of dollars of TPUs annually over the next several years.” That forecast covers Google, a customer of Alphabet, suggesting additional growth could come as Broadcom serves other hyperscalers.
The valuation looks low relative to long-term earnings potential
Broadcom extended its outlook through fiscal 2028 and now expects AI chip revenue to reach $230 billion. For comparison, total trailing-12-month revenue is $89 billion.
| Fiscal Year | AI Semiconductor Revenue Guidance | Projected Growth |
|---|---|---|
| Fiscal 2026 | $58 billion | 186% |
| Fiscal 2027 | $115 billion | 98% |
| Fiscal 2028 | $230 billion | 100% |
Data source: Broadcom fiscal Q3 2026 press release. YOY = Year over year.
Component shortages, particularly in memory, could make those targets more difficult to achieve. Tan, however, said Broadcom has secured the supply needed to meet forward demand.
Demand also appears to be running ahead of plan. “Our demand actually exceeds this outlook, and we will work to improve supply,” Tan said on the Sept. 2 call.
Management says the fiscal 2028 target of $230 billion in AI chip revenue should translate to about $30 in earnings per share. Wall Street’s consensus currently centers around that figure and implies approximately $135 billion in fiscal 2028 free cash flow.
Broadcom closed at $368.56 on Sept. 8, 2026, equal to roughly 12 times its fiscal 2028 earnings. Leading semiconductor stocks trade closer to 25 times current-year estimates. If Broadcom’s valuation approaches that level over the next two years and its earnings targets are achieved, today’s price could support roughly a doubling.
Key risks to monitor
Broadcom depends on six customers for most of its AI chip orders. Although they are leading AI companies, that concentration creates execution risk because their spending must continue growing rapidly enough to support Broadcom’s aggressive data-center investments.
Regulation could also slow new data-center construction. Public concern about the effects of data centers on communities and utility bills is increasing, and a slowdown in AI infrastructure spending could pressure chip stocks.
Those concerns could also create an opportunity. Broadcom’s relatively modest valuation compared with its growth leaves substantial room for upside if the risks prove exaggerated. If the AI build-out continues longer than investors expect, the stock could deliver market-beating returns.
Is Broadcom stock attractive right now?
Investors considering Broadcom should weigh its exceptionally strong AI growth and attractive valuation against customer concentration, supply constraints and execution risk.
Based on current guidance, the stock appears attractively valued. However, the potential upside depends on Broadcom’s ability to secure components, satisfy customer demand and reach its ambitious fiscal 2028 earnings target.
