Broadcom (AVGO) Stock Drops 24% — Is This the Buying Opportunity JPMorgan Thinks It Is?

TLDR

• Broadcom stock is down about 24% from its record high near $495.
• Q2 revenue hit a record $22.2B, with AI chip sales up 143% year-on-year to $10.8B.
• Q3 AI chip guidance of ~$16B came in below investor hopes of $17B+, triggering the drop.
• CEO Hock Tan did not raise the long-term $100B+ AI chip target for fiscal 2027, disappointing the market.
• Analysts remain bullish — JPMorgan kept its Overweight rating and $580 price target.

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Broadcom’s fiscal Q2 was a record quarter by almost every measure. Revenue jumped 48% year-on-year to $22.2 billion. Adjusted earnings came in at $2.44 per share. AI semiconductor revenue surged 143% to $10.8 billion. And the stock fell 24% from its all-time high anyway.

Broadcom Inc., AVGO

That tells you something about where expectations had got to.

The selloff was not about bad numbers. It was about guidance that wasn’t quite good enough for a market that had priced in perfection. Broadcom said it expects around $16 billion in AI chip revenue for fiscal Q3. That would be more than triple the year-earlier figure — but investors had been hoping for $17 billion or more.

The other miss: CEO Hock Tan did not raise the company’s long-term AI chip target. He stuck with the existing goal of more than $100 billion in AI chip sales for fiscal 2027. In this market, holding the line was read as a red flag.

Trading volume spiked hard on the day of the drop. This was not a slow reassessment — it was a reset.

What the Numbers Actually Show

There’s a gap worth looking at here. Broadcom shipped $10.8 billion in AI chips last quarter. But Tan said AI semiconductor bookings in that same quarter were over $30 billion. Customers are ordering nearly three times more than Broadcom can currently ship. That’s not a demand problem.

Tan described demand for XPUs and networking as “simply insatiable.” The company has gigawatt-scale commitments from Anthropic, OpenAI, and Meta, and now expects to ship more than 10 gigawatts of AI chips in 2027.

On June 24, Broadcom and OpenAI also released their first custom AI chip together, called the Jalapeño. It was built specifically for inference and is already running in labs using OpenAI’s GPT-5.3-Codex-Spark model. Tan told Reuters the chip is competitive with Nvidia’s Blackwell GPUs and Google’s TPUs. OpenAI plans to deploy it before year-end.

What Wall Street Is Saying

Analysts are not walking away. JPMorgan reiterated its Overweight rating and $580 price target after the drop, telling clients it would be “aggressive buyers” at current levels.

The broader analyst picture is still heavily bullish — a large majority of ratings are Buys, with average price targets still above $500.

There are real risks on the table. CFO Kirsten Spears has flagged margin pressure as AI grows as a share of Broadcom’s business, since some AI system sales carry lower margins than the software segment. Tan has also acknowledged that Google may diversify its TPU suppliers over time, even though Broadcom remains central to Google’s chip roadmap.

The selloff spread beyond Broadcom too. Nvidia, AMD, Marvell, Intel, and Micron all came under pressure in the days following the report, as investors reassessed AI-related valuations across the sector.

Broadcom’s Q3 AI chip guidance of approximately $16 billion, while short of analyst hopes, would still represent triple the year-ago figure.