Why Broadcom crash could be buying opportunity
This American tech giant has been hit hard after publishing Q1 results, but influential analysts are surprised. Graeme Evans reveals why they’d still buy the stock.
4th June 2026 14:50
by Graeme Evans from interactive investor
Photo: Jonathan Raa/NurPhoto via Getty Images.
The perfection demanded by Wall Street’s AI trade was today shown by Broadcom Inc (NASDAQ:AVGO) after its valuation slumped by the equivalent of the largest company in the FTSE 100 index.
The semiconductor giant lost about $300 billion (£223 billion) - close to the same as HSBC Holdings (LSE:HSBA) - as shares skidded 14% on the failure of quarterly results to include an upgrade on current guidance for $100 billion-plus of AI revenues in the 2027 financial year.
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The sharp reverse came even though Broadcom delivered on expectations with record sales, operating profit and free cash flow in the second quarter of its 2026 financial year.
The shares have jumped more than 80% in the past year to $479, including 55% since the end of March to propel Broadcom’s market capitalisation to $2.3 trillion. That’s more than the $1.3 trillion for Tesla Inc (NASDAQ:TSLA) and $1.6 trillion for Meta Platforms Inc Class A (NASDAQ:META) and compares with NVIDIA Corp (NASDAQ:NVDA) at $5.2 trillion.
Broadcom shares traded at $408 in the opening moments of today’s session.
The AI disappointment weighed on the tech-focused Nasdaq, which had been at a record level earlier this week after a run of nine consecutive gains up until Tuesday night.
Deutsche Bank today said it regarded Broadcom’s messaging-related pullback as a buying opportunity as it reiterated its own Buy stance and lifted its price target from $430 to $515. This represents a multiple of about 23 times forecast 2027 earnings.
Broadcom’s semiconductor portfolio includes data centre switches and routers, while its infrastructure software operation features enterprise solutions for building, connecting and managing complex digital environments.
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Revenues for the quarter to 3 May rose 48% on a year earlier to $22.2 billion, leading to a 52% improvement in underlying earnings at $15.2 billion.
Semiconductor revenues from AI grew 143% year-over-year to $10.8 billion, which was above the company's forecast amid increasing demand for custom AI accelerators and AI networking,
Chief executive Hock Tan said momentum continued into the current quarter, leading to expectations that semiconductor revenue from AI will grow over 200% year-over-year to $16 billion. However, he opted against increasing the longer-term figure.
Deutsche Bank said: “We view this lack of a positive revision is largely due to conservatism and believe that AI revenues will likely exceed his original target and grow significantly in 2028.”
The bank sees Broadcom achieving a figure of $125 billion, rising to $190 billion the year after.
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Morgan Stanley, which lifted its price target from $485 to $502 a share following the results, said the after-hours sell-off for Broadcom was somewhat surprising.
It added: “With the multiple expansion for just about every semiconductor company with even modest data-centre exposure, our view is that the central characters in the AI ramp - Nvidia and Broadcom - are now the most attractively valued names.”
The bank said Nvidia remains its top pick but that it would certainly buy Broadcom before most of the other compute names in its coverage.
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