Broadcom (AVGO) Is Down More Than 20%—Why TD Cowen Still Sees 27% Upside

Broadcom Inc. (NASDAQ:AVGO) experienced a significant 20% drop from its June all-time highs, impacted by lofty AI expectations, high valuation, market pressures, Mediatek-driven narrative, and Marvell Technology Inc. (NASDAQ:MRVL). TD Cowen analyst Joshua Buchalter increased his rating to Buy, proposing a $500.00 price target. Q2 2026 saw AI semiconductor revenue grow 143% YoY, exceeding forecasts.

The firm forecasts a staggering $16.0 billion AI semiconductor revenue growth YoY, with a $30 billion in AI semiconductor bookings reflecting intense demand. Management is confident in reaching over $100 billion in fiscal 2027 AI semiconductor revenue, which could easily surpass expectations. Broadcom's collaboration with Google to develop future generations of custom AI chips for Google's next-generation AI racks through 2031 is a key driver.

However, Mediatek's entry into the TPU program and potential competition from OpenAI's ASIC could pose challenges. Broadcom expects its Q3 consolidated gross margins to decline to approximately 74%, reflecting a product mix between semiconductors and infrastructure software. Insiders show strong confidence, with 173 hedge funds holding Broadcom stock, and limited short interest at 1.31% of the float.

Looking ahead to fiscal Q3, Broadcom forecasts revenue growth of 84% YoY to $29.4 billion, AI semiconductor revenue of $16 billion, and a non-GAAP operating margin of 67%.