Broadcom Is Making AI Chips with Google. Does That Make AVGO Stock a Buy Now?

Chip giant Broadcom (AVGO) revealed that it has landed a long-term partnership with Alphabet’s (GOOG)(GOOGL) Google to produce the future versions of its artificial intelligence (AI) chips. Broadcom helps Google make its custom tensor processing units (TPUs).

The company also signed a deal with Anthropic, which gives the popular AI startup access to about 3.5 gigawatts worth of computing capacity, drawing on Google’s AI processors. This builds on Broadcom’s existing partnership, as on the last earnings call, Broadcom CEO Hock Tan said the firm has had a “very good start in 2026” by providing 1 gigawatt of compute from Google’s TPUs.

Therefore, as Broadcom gained 6.2% intraday on Apr. 7 after this partnership announcement, should you consider investing in the stock?

About Broadcom Stock

Headquartered in Palo Alto, California, Broadcom designs, manufactures, and supplies advanced semiconductor and infrastructure software solutions that power modern digital infrastructure. The company operates across two core pillars: high-performance chips for data centers, networking, broadband, wireless, storage, and industrial systems; and enterprise-grade software that optimizes mainframes, cloud environments, cybersecurity, and automation.

Recently, Broadcom has sharpened its focus on AI by layering AI-specific capabilities into its networking and connectivity silicon and by building a full-stack AI infrastructure platform. The company is now positioning itself less as a pure-play chip vendor and more as an “architect” of AI clusters, scale, and data center fabrics. The company has a market capitalization of $1.66 trillion.

Over the past year, Broadcom’s stock has reaped the benefits of AI‑driven networking demand, successful integration of VMware, and high-margin software earnings. It has gained 124.72% over the past 52 weeks. The shares had reached a 52-week high of $414.61 in December 2025, but are down 15.4% from that level. Although the underlying business remains strong, the stock has pulled back from its AI-driven highs, up only 1.31% year-to-date (YTD).

On a forward-adjusted basis, Broadcom’s price-to-earnings (non-GAAP) ratio of 29.43 times is a bit stretched compared to the industry average of 21.74 times.

Broadcom Posts Record Q1 on AI Networking Growth

The networking chip producer reported a record $19.31 billion in total revenues for the first quarter of fiscal 2026 (quarter ended Feb. 1), up 29% year-over-year (YOY). The figure was also higher than the $19.29 billion that Street analysts had expected. The company continued to show robustness in AI semiconductor solutions.

In fact, AI revenue grew 106% YOY to $8.4 billion, driven by strong demand for its custom AI accelerators and AI networking solutions. The company expects to continue seeing this momentum, projecting a $10.70 billion in AI semiconductor revenue for the fiscal second quarter.

Also, the profitability aspect is working in Broadcom’s favor. Its adjusted EBITDA for the quarter grew 30% from the prior-year period to a record $13.13 billion. Its non-GAAP EPS also increased 28% YOY to $2.05, modestly surpassing the $2.04 that Street analysts had expected.

For the second quarter, Broadcom expects revenue growth to accelerate to 47% YOY to reach $22 billion, while adjusted EBITDA is forecast to be 68% of that figure. Wall Street analysts are also optimistic about Broadcom’s Q2 earnings, expecting the company’s profit to grow 50.38% YOY to $2.00 per diluted share. For fiscal 2026, EPS is projected to surge 74.42% annually to $9.82, followed by 60.59% growth to $15.77 in fiscal 2027.

What Do Analysts Think About Broadcom’s Stock?

On the news of Broadcom’s long-term partnership with Google, analysts at Rosenblatt reiterated a bullish “Buy” rating and a $500 price target on its stock. Analysts think this partnership lessens concerns that MediaTek will take TPU market share from Broadcom. Furthermore, Rosenblatt believes that Anthropic’s commitment could confirm the company’s goal of exceeding $100 billion in AI chip revenue in 2027.

Last month, Morgan Stanley analyst Joseph Moore maintained an “Overweight” rating on Broadcom and raised the price target from $462 to $470 following the company's solid Q1 results. The analyst noted that strong AI demand remains a key driver of upside for Broadcom, as networking performance exceeded expectations and earlier worries about margins have eased. Truist Securities analyst William Stein also maintained a “Buy” rating and raised the price target to $545 from $510.

Wall Street analysts are strongly bullish on Broadcom’s stock, with a consensus “Strong Buy” rating. Of the 42 analysts rating the stock, a majority of 35 analysts have given it a “Strong Buy” rating, three analysts suggested “Moderate Buy,” while four analysts are playing it safe with a “Hold” rating. The consensus price target of $467.64 represents 33.4% upside from current levels. The Street-high price target of $630 represents an 79.7% potential upside.

Key Takeaways

Broadcom is hoping to tap into a potentially huge TPU market as AI chips become increasingly popular. In fact, the global AI chip market is set to expand from $102.89 billion in 2025 to an impressive $1.35 trillion by 2035, with a CAGR of 29.4% over this period. Therefore, given Broadcom’s solid fundamentals and the stock's recent pullback, it might be an opportune time to enter.

On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com