AVGO: AI Accelerator Deals And OpenAI Partnership Will Shape Balanced Future Outlook

Analysts have lifted their Broadcom fair value estimate from approximately $274 to $345 per share, citing sharply higher expected AI driven revenue growth, stronger profit margins from custom accelerator wins with hyperscalers and OpenAI, and a supportive broader AI spending backdrop reflected in a wave of higher Street price targets.

Analyst Commentary

Street research remains broadly constructive on Broadcom, with a wave of higher price targets and fresh Buy and Outperform initiations underscoring confidence in the company as a key beneficiary of the AI infrastructure build out. Recent notes highlight upside to consensus estimates as custom accelerators ramp across hyperscale customers, with particular focus on OpenAI, Google and other large scale AI deployments.

Multiple firms lifted price targets into the $400 to $460 range as they incorporated the newly disclosed 10 gigawatt OpenAI collaboration and related custom ASIC wins. Analysts argue that the project pipeline, which now includes both previously announced awards and the new OpenAI contract, supports a multi year AI revenue trajectory that is materially higher than prior expectations, with some projections calling for Broadcom's AI revenue to surpass $70 billion later this decade.

In addition to direct custom silicon wins, Broadcom is seen benefiting from a generally robust AI spending environment. Datapoints from peer results, hyperscaler capex revisions and strong guidance from leading GPU vendors all reinforce the view that AI data center budgets are expanding, which should support Broadcom's networking and custom compute franchises. The company is also viewed as a share gainer in the broader AI complex, providing tailored alternatives to general purpose processors and increasingly pitching full rack scale solutions that raise its system level content.

Beyond AI specific drivers, some strategists see potential incremental tailwinds from shifts in semiconductor supply chain policy and a possible push toward more U.S. based manufacturing. In this scenario, Broadcom, alongside other large U.S focused compute vendors, could see stronger demand flowing to domestic fabs and packaging partners, which may further support long term growth assumptions embedded in current valuation frameworks.

However, even as the prevailing tone is positive, recent research highlights a growing dispersion of views around how much of the AI opportunity is already reflected in Broadcom's share price and whether execution can keep pace with elevated expectations.

Bearish Takeaways

• Bearish analysts caution that soaring price targets and Street AI revenue estimates may be running ahead of execution, creating downside risk if large custom ASIC programs, including OpenAI related deployments, slip in timing or fail to ramp at the assumed pace.
• Some see intensifying competition from Nvidia and other GPU centric platforms as a key risk, arguing that deeper strategic partnerships between OpenAI and GPU vendors could cap Broadcom's share of incremental AI spend and pressure long term growth assumptions baked into current valuation multiples.
• There are concerns that Broadcom's increasing reliance on a small set of hyperscale customers, coupled with very large, multi year contracts, raises concentration and contract renewal risk, which could lead to greater earnings volatility than the market currently discounts.
• Bearish analysts also flag uncertainty around the economics of rack scale and system level solutions, warning that lower margin integrated offerings or aggressive pricing to win marquee deals could weigh on gross margin trajectory and undermine the premium multiple currently afforded to the stock.

What's in the News

• Issued first quarter fiscal 2026 guidance calling for approximately $19.1 billion in revenue, up 28% year over year (company guidance)
• Approved a quarterly cash dividend of $0.65 per share for fiscal 2026, a 10% increase from the prior quarter (Board announcement)
• Announced a landmark collaboration with OpenAI to deliver 10 gigawatts of custom AI accelerators, using Broadcom Ethernet networking across OpenAI and partner data centers (strategic alliance)
• Introduced Thor Ultra, the industry’s first 800G AI Ethernet NIC, to interconnect hundreds of thousands of XPUs for large scale AI workloads (product announcement)
• Launched Brocade Gen 8 128G Fibre Channel platforms, including Brocade X8 Directors and G820 switches, targeting mission critical storage and enterprise AI environments (product announcement)

Valuation Changes

• Fair Value Estimate has risen meaningfully, from approximately $274 to about $345 per share, reflecting upgraded assumptions for AI driven revenue and profitability.
• Discount Rate has increased slightly, from roughly 10.1% to about 10.6%, implying a modestly higher required return and risk premium in the updated model.
• Revenue Growth has been marked higher, with the long term forecast moving from about 19.2% to roughly 23.6%, incorporating stronger expected AI infrastructure demand.
• Net Profit Margin has risen modestly, from around 41.8% to about 44.4%, as analysts embed improved operating leverage from custom ASIC and networking scale.
• Future P/E multiple is essentially unchanged. It has nudged up only slightly from about 41.8x to roughly 42.3x, suggesting the higher valuation is driven more by fundamentals than multiple expansion.