Research · Initiation · 7 October 2026

Broadcom Nasdaq: AVGO

Broadcom is still paid either way, but the tailor now earns most of the toll. At US$363, the price assumes AI revenue barely grows after fiscal 2027.

The call LONG

Price at publication: US$362.51close, 5 October 2026
Target: US$485.00+33.8% · 12 months, to October 2027
Conviction: Medium

What proves it wrongThe shares close below US$270 by October 2027, or Broadcom cuts its fiscal 2027 AI revenue outlook below US$100 billion, or it makes a payment under its Backstop for a customer's AI rack leases.

Read the full notePDF, 6 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves

The call in brief

Broadcom makes the custom AI chips that Google, Meta and OpenAI use to rely less on Nvidia, and the Ethernet switch chips that clusters of any maker's chips run on. AI revenue was US$16.7 billion in the quarter to 2 August 2026, up 221 per cent on a year earlier.
The claim is holding, but its weight has shifted. Custom chips were 73 per cent of AI revenue in that quarter, and networking's share fell from almost 40 per cent to 27 per cent in three months. In June Broadcom put the likely level at about 30 per cent; in September it said networking would grow just as fast as custom chips.
Management expects AI revenue of about US$115 billion in fiscal 2027 and US$230 billion in fiscal 2028. At US$362.51 the shares price about US$127 billion for fiscal 2028, on my sum of the parts with chips at 20 times and software at 17 times.
My call is long, with medium conviction. I take US$190 billion for fiscal 2028, 17 per cent below management, which gives US$486 a share, 34 per cent above the price, within a range of US$226 to US$647.
Where I was wrong: my piece said Anthropic designs its own chips with Broadcom. Broadcom's 8-K shows Anthropic accesses Google's TPU design through Broadcom. The 10-Q and the September call show its first deployment, of more than one gigawatt, is leased from a financial partner, with Broadcom backstopping up to about US$29 billion.

The claim it rests on, made 2 October 2026

Broadcom is paid whether the cloud giants stay with Nvidia or leave for their own chips.

Rests on: How ten thousand chips talk: the glass stays, and the plug survives its replacement

Later evidence on this claim: the same section as it stands now, with anything the deep piece has added since the note.

Where I was wrongI wrote that Google, Meta, Anthropic and OpenAI design their own AI chips with Broadcom for their own data centres; Anthropic does not design its own chip with Broadcom but accesses Google's TPU design through it, and the 10-Q and the September call show its first deployment, of more than one gigawatt, is leased from a financial partner rather than owned. The piece and the claim stay as published; the note explains what changed my view.