Shares of Broadcom fell sharply on Tuesday as investors took profits following a massive rally tied to artificial intelligence infrastructure demand, even as analysts continued raising price targets ahead of the company’s upcoming quarterly earnings report.
Broadcom (AVGO) shares dropped as much as 4.67% during the session to $408.41 before recovering to around $414.04.
Despite this, Citigroup analysts raised their price target on Broadcom to $500 from $475 while maintaining a Buy rating and naming the company their top semiconductor pick for 2026.
The latest volatility follows a powerful rally in Broadcom shares, which have climbed nearly 40% since early April as enthusiasm surrounding artificial intelligence infrastructure spending accelerated across the semiconductor sector.
AI demand continues driving growth expectations
Citi analyst Atif Malik said he expects Broadcom’s fiscal second-quarter revenue and earnings per share results to slightly exceed Wall Street expectations when the company reports earnings on June 3.
The analyst pointed to sustained AI demand as the primary growth driver.
Citi’s updated $500 price target is based on a 20-times multiple applied to its fiscal 2028 earnings-per-share estimate of $25.
The firm said that looking ahead to fiscal 2028 provides “increased earnings visibility.”
Malik forecasts that AI-related revenue could rise from approximately 49% of Broadcom’s total revenue currently to roughly 81% by the fourth quarter of fiscal 2028.
The analyst also increased projections for Broadcom’s AI revenue opportunity, estimating AI-related sales could reach $115 billion in 2027, up from a previous forecast of $100 billion, before expanding further to $180 billion in 2028.
Broadcom currently works with six major AI customers, including Google, Meta, Anthropic, and OpenAI, along with two unnamed clients that Malik believes may include ByteDance.
The company is also developing custom AI chips for three additional customers.
Custom AI chips remain central to Broadcom strategy
Broadcom has become one of the biggest beneficiaries of the expanding AI infrastructure buildout through its custom AI chip business.
The company designs specialized AI chips for hyperscale customers seeking lower-cost alternatives to graphics processing units for training and inference workloads.
One of Broadcom’s most important partnerships involves Google’s Tensor Processing Units, or TPUs, which are increasingly being deployed across Google Cloud and external customer environments.
Several hyperscalers are expected to launch additional custom AI chips over the next two years, potentially expanding Broadcom’s position further within the AI ecosystem.
Broadcom Chief Executive Officer Hock Tan previously said the company believes its custom AI chip business could eventually generate more than $100 billion in annual revenue by 2027.
Wall Street analysts currently expect Broadcom’s total revenue to increase from approximately $63.9 billion at the end of fiscal 2025 to around $158 billion by fiscal 2027.
Valuation concerns emerge after massive rally
Despite the bullish outlook, some investors remain cautious following Broadcom’s rapid share price appreciation.
The stock now trades at approximately 38 times projected 2026 earnings and 24 times estimated 2027 earnings.
Analysts noted that Broadcom will likely need to continue outperforming expectations in order to justify further gains from current levels.
Still, Citi dismissed concerns surrounding Broadcom’s software business, describing such worries as “overblown.”
The firm said Broadcom’s enterprise software products remain deeply integrated within large organizations, particularly among companies with more than 10,000 employees, with little evidence of meaningful customer migration to competing platforms.
Enterprise security also remains a growing opportunity as corporations increase investments in infrastructure protection tied to the rise of agentic AI systems.
Broadcom currently holds a Strong Buy consensus rating among Wall Street analysts, with 25 Buy recommendations and four Hold ratings.
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