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

Broadcom Inc. (NASDAQ: AVGO) is down roughly 20% from its June all-time high amid lofty AI expectations, valuation concerns, broader market pressure, the MediaTek narrative and competition from Marvell Technology Inc. (NASDAQ: MRVL). TD Cowen analyst Joshua Buchalter nevertheless reiterated a Buy rating and a $500 price target, implying 27% upside. The bullish case rests on accelerating demand. In Q2 2026, AI semiconductor revenue reached $10.8 billion, up 143% year over year and above Broadcom’s forecast, supported by custom AI accelerators and AI networking. The company expects AI semiconductor revenue to rise more than 200% year over year to $16.0 billion and has reported $30 billion in AI semiconductor bookings. Management also sees a path to more than $100 billion of fiscal 2027 AI semiconductor revenue. If the roughly 10GW opportunity is deployed, that figure could prove conservative. Broadcom remains particularly confident in its Tensor Processing Unit (TPU) outlook, supported by Google’s capital-expenditure commentary. In April, Broadcom signed a long-term agreement with Google to develop and supply future generations of custom artificial-intelligence chips and components for next-generation AI racks through 2031. Channel checks indicate potential upside to Broadcom’s estimates despite MediaTek entering the TPU program. Google reportedly plans to use MediaTek for a TPU while retaining Broadcom, diversifying custom AI silicon beyond a single supplier. Google also expanded its partnership with Marvell, challenging Broadcom’s near-monopoly over Google’s TPUs. Risks include MediaTek’s competing design role, the softening of Meta Platforms, Inc. (NASDAQ: META)’s MTIA timeline and uncertainty around OpenAI’s ASIC, whose timing remains unconfirmed despite a multi-year collaboration agreement. Broadcom expects Q3 consolidated gross margin to decline to approximately 74%. Kirsten Spears said the change reflects product mix between semiconductors and infrastructure software, rather than structural semiconductor-margin deterioration. Institutional sentiment remains supportive: 173 hedge funds held Broadcom at the end of Q1 2026, down from 202, while 1.31% of its public float was sold short. For fiscal Q3, Broadcom expects revenue of $29.4 billion, up 84% year over year, AI semiconductor revenue of $16 billion and a 67% non-GAAP operating margin. The thesis depends on converting its pipeline into sustained revenue and market-share gains.