The Broadcom Dip Is a Gift

1 month ago 24

Marc Guberti, The Motley Fool

Mon, July 27, 2026 astatine 9:20 AM CDT 3 min read

A broader AI correction has gripped the banal market, resulting successful high-growth companies trading astatine compelling valuations. Broadcom (NASDAQ: AVGO) was approaching $500 per stock earlier successful the year, but has present dropped by much than 20% from its all-time high.

The AI chipmaker didn't bash thing wrong. Its fundamentals are really improving, and semipermanent tailwinds proceed to build. High-quality stocks tin get caught successful the crossfire from pessimistic investors, and that provides a large accidental for radical who bargain the dip.

Missed Nvidia successful 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" awesome flashed for a little-known chipmaker called Nvidia. For the archetypal clip successful years, that aforesaid "Total Conviction" awesome is flashing for a institution 1/100th the size of Nvidia. Continue »

Custom chips are becoming much important

Nvidia was the main absorption early, with its graphics processing units (GPUs) handling wide grooming tasks rather effectively. However, Broadcom's customized chips are amended for AI inference and the optimization of precise circumstantial tasks, some of which are gaining importance.

Just arsenic Nvidia is the undisputed person of the GPU industry, Broadcom has a comfy pb implicit its competitors successful the ASIC industry. ASICs are customized chips, and tech giants person been successful a unreserved to bargain them lately. For instance, Alphabet is selling immoderate of its Tensor Processing Unit (TPU) chips to customers. Broadcom designs and supplies Alphabet's TPUs, truthful it volition make much gross arsenic Alphabet ventures into this business.

Meta Platforms is besides turning to Broadcom for customized AI chips. The sanction of these chips -- Meta Training and Inference Accelerator (MTIA) chips -- sounds similar they volition beryllium exclusively for Meta Platforms. However, Facebook's genitor institution has been looking astatine different gross streams to diversify its business. A imaginable neocloud conception has travel up aggregate times, and this benignant of reasoning whitethorn effect successful Meta Platforms selling chips successful the future. Those chips would beryllium designed and supplied by Broadcom.

AI gross continues to surge

These tailwinds besides travel with meaningful gross maturation close now. Investors aren't waiting for a backlog to materialize and accepting debased maturation rates close now. Broadcom posted 48% year-over-year gross maturation successful its fiscal 2026 2nd quarter, but its AI semiconductor conception was the main highlight.

That portion of the concern brought successful $10.8 billion, which is simply a 143% year-over-year increase. Since it represented astir fractional of Broadcom's full revenue, investors tin expect meaningful gross acceleration successful aboriginal quarters, arsenic agelong arsenic AI request continues to vigor up.

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