Broadcom (AVGO) Stock Plunges 24%: Why JPMorgan Sees a Golden Entry Point

Key Takeaways

• Broadcom shares have tumbled roughly 24% from their peak around $495.
• The company delivered record Q2 revenue of $22.2B, with AI semiconductor sales soaring 143% annually to $10.8B.
• Fiscal Q3 AI chip revenue guidance of approximately $16B fell short of Wall Street’s $17B+ expectations, sparking the selloff.
• CEO Hock Tan maintained the existing fiscal 2027 AI chip revenue target above $100B, declining to increase it further.
• Wall Street analysts, including JPMorgan, continue to favor the stock with a $580 target and Overweight rating.

By virtually every financial metric, Broadcom delivered an exceptional fiscal second quarter. Year-over-year revenue climbed 48% to reach $22.2 billion. The company posted adjusted earnings of $2.44 per share. AI semiconductor revenue more than doubled, rocketing 143% higher to $10.8 billion. Yet the stock collapsed 24% from its record high regardless.

Broadcom Inc., AVGO

This dramatic disconnect reveals just how elevated investor expectations had become.

The market punishment wasn’t driven by poor performance. Instead, it stemmed from forward-looking projections that failed to match the lofty bar set by an overly optimistic market. Broadcom forecasted roughly $16 billion in AI chip revenue for its fiscal third quarter. While this represents more than a tripling versus the prior-year period, Wall Street had anticipated at least $17 billion.

Adding fuel to the fire: CEO Hock Tan chose not to elevate the company’s long-range AI semiconductor revenue projection. He maintained the existing forecast of exceeding $100 billion in AI chip sales by fiscal 2027. In today’s momentum-driven market, failing to raise guidance was interpreted as a bearish signal.

Trading activity exploded on the day shares plummeted. This wasn’t a gradual reevaluation — it was an abrupt market recalibration.

The Underlying Fundamentals Tell a Different Story

There’s a crucial disparity that deserves attention. While Broadcom delivered $10.8 billion worth of AI chips last quarter, Tan revealed that AI semiconductor orders during that identical period topped $30 billion. In other words, customers are placing orders at nearly triple the rate Broadcom can fulfill them. This points to a supply constraint, not faltering demand.

Tan characterized the appetite for XPUs and networking infrastructure as “simply insatiable.” The semiconductor giant has secured gigawatt-scale commitments from major AI players including Anthropic, OpenAI, and Meta. Management now anticipates shipping over 10 gigawatts of AI chips by 2027.

On June 24, Broadcom and OpenAI unveiled their inaugural collaborative custom AI processor, dubbed the Jalapeño. Engineered specifically for inference workloads, the chip is already operational in testing environments running OpenAI’s GPT-5.3-Codex-Spark model. Tan informed Reuters that the processor rivals Nvidia’s Blackwell GPUs and Google’s TPU offerings in performance. OpenAI intends to begin deployment before the calendar year closes.

How the Analyst Community Is Responding

Sell-side analysts aren’t abandoning their bullish stance. JPMorgan maintained its Overweight rating along with a $580 price objective following the decline, advising clients it would be “aggressive buyers” at these price levels.

The overall Wall Street consensus remains decidedly positive — a substantial majority of analyst ratings are in Buy territory, with consensus price targets still exceeding $500.

That said, legitimate challenges exist. CFO Kirsten Spears has highlighted potential margin compression as AI business grows relative to Broadcom’s total revenue mix, noting that certain AI system sales generate thinner margins compared to the software division. Tan has also acknowledged the possibility that Google might expand its TPU supplier base over time, though Broadcom continues to play a pivotal role in Google’s semiconductor strategy.

The downturn extended beyond Broadcom as well. Shares of Nvidia, AMD, Marvell, Intel, and Micron all faced selling pressure in the sessions following Broadcom’s report, as investors recalibrated valuations throughout the AI semiconductor landscape.

Broadcom’s fiscal Q3 AI chip guidance of roughly $16 billion, though below analyst projections, would still mark a threefold increase compared to the same quarter last year.

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