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FollowingBank of America lowered its target price for Broadcom despite strong earnings and aggressive AI growth expectations
Bank of America lowered its target price for Broadcom from $530 to $460 despite semiconductor giant Broadcom reporting record quarterly results and proposing one of the most aggressive AI growth forecasts in the semiconductor industry. According to analyst tracking data, Bank of America analyst Vivek Arya maintained a "buy" rating on AVGO shares after lowering its target price by $70. The new price target means that the stock still has significant upside compared to Broadcom's recent trading levels.
This downgrade is particularly prominent because while Bank of America took action, several other Wall Street institutions took the opposite direction after Broadcom released its third-quarter report. Goldman Sachs raised its price target to $540 from $525, while Bernstein raised its price target to $575 from $550. Baird maintained its $630 price target, one of the highest levels on Wall Street.
Broadcom's AI business achieved triple-digit growth
Broadcom reported revenue in the third quarter of the fiscal year was US$29.59 billion, a significant increase from 86% in the same period last year. Adjusted earnings per share reached $3.32, and free cash flow climbed to $13.67 billion.
The most eye-catching figure is AI semiconductor revenue, which surged 221% year-on-year to US$16.7 billion. Broadcom expects this figure to accelerate to approximately US$21.7 billion in the fourth quarter.
CEO Hock Tan also significantly expanded the company's expectations for the long-term AI outlook. Broadcom now expects its AI semiconductor revenue to reach approximately US$115 billion in fiscal year 2027 and approximately US$230 billion in fiscal year 2028 as demand for customized accelerators and networks increases.
Strong results still failed to meet investor expectations
Despite the strong results, Broadcom's share price fell after the report was released as investors focused on short-term guidance. The company expects fourth-quarter revenue to be approximately $34.8 billion, a figure close to or slightly below Wall Street consensus estimates shown by various data providers.
This response reflects a broader problem facing the entire AI sector: When expectations are already extremely high, rapid growth is no longer automatically a sufficient positive factor. Our overall observation of AI chip stocks shows that Broadcom is not only competing with Nvidia, but is also increasingly facing competitive pressure from Marvell in the fields of customized silicon wafers and networking. Maiwell's expanding partnership with Google adds another competitive pressure.
Therefore, the key to the disagreement is not whether Broadcom's AI business is growing, but how much of this growth is already reflected in AVGO's valuation. This theme is common throughout the industry. AI infrastructure analysis points out that investors are increasingly inclined to make decisions based on weighing growth potential, valuations, customer concentration, and infrastructure constraints, rather than just chasing AI revenue numbers on the front page.
For Broadcom, Bank of America's lowered target price has added a touch of caution to the originally optimistic post-earnings analyst group. The company's $230 billion AI forecast is huge; the question now is whether profits can grow fast enough to meet potentially larger expectations.
