Broadcom (AVGO) Is Down More Than 20%—Why TD Cowen Still Sees 27% Upside

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Broadcom (AVGO) Is Down More Than 20%—Why TD Cowen Still Sees 27% Upside Ghazal Ahmed Wed, August 19, 2026 at 5:49 PM EDT 4 min read AVGO META MRVL Broadcom Inc. (NASDAQ: AVGO ) stock is down roughly 20% from its all-time highs in June, a pullback driven by a mix of lofty AI expectations, a high valuation multiple, broader market pressures, the Mediatek-driven narrative, and more recently, Marvell Technology Inc. (NASDAQ: MRVL ). Despite the drop, TD Cowen analyst Joshua Buchalter recently reiterated a Buy rating on the stock with a $500.00 price target. TD Cowen remains confident in Broadcom's trajectory ahead of the print, and the numbers justify the optimism. Q2 2026 saw semiconductor revenue from AI of $10.8 billion growing 143% year-over-year, above the company's forecast, backed by increasing demand for custom AI accelerators and AI networking. The company forecasts semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion. Its massive $30 billion in AI semiconductor bookings is also a reflection of the intense demand for their AI solutions. Management has reiterated its line of sight to more than $100 billion of fiscal 2027 AI semiconductor revenue, a figure that could see material upside if the roughly 10GW opportunity is deployed. This implies that even the $100b could prove conservative. The firm is also particularly confident about the trajectory of TPU, backed by Google's capital expenditure commentary. Back in April, the company signed a long-term agreement with Google to develop and ‌supply future generations of custom artificial intelligence chips and components for its next-generation AI racks through 2031. Channel checks also seem to point to upside to Broadcom's estimates despite Mediatek's entry into the TPU program. Google was reportedly preparing to use Mediatek for a Tensor Processing Unit while retaining Broadcom, marking a strategic shift for the company where it diversifies its custom AI silicon away from relying exclusively on Broadcom. Broadcom may be on the path to $100 billion, but there are some prominent headwinds. The most prominent one, despite channel checks pointing toward upside, is Mediatek's entry into the TPU program as a competing design partner. The incremental softening of Meta Platforms, Inc. (NASDAQ: META )'s MTIA chip timeline last quarter remains another risk, coupled with uncertainty surrounding other projects like OpenAI's ASIC. The timing remains unconfirmed for OpenAI's program despite the multi-year collaboration agreement. To make matters worse, Broadcom expects its Q3 consolidated gross margins to decline approximately 74%. "As the proportion of AI revenue significantly grows in Q3, we expect Q3 consolidated gross margin to be down to approximately 74%. This decline in gross margin does not represent a structural change in semiconductor margin. Rather, it reflects product mix between semiconductors and infrastructure software." Competitive concerns have also intensified for AVGO after Google expanded its custom AI silicon partnership with Marvell Technology. The move may be a negative development for Broadcom as it breaks its near-monopoly over Google's Tensor Processing Units (TPUs) and also introduces a rival into Google's ecosystem. Institutional interest seems to be largely in favor of the stock, nevertheless. According to Insider Monkey's database, 173 hedge funds held stakes in Broadcom at the end of the first quarter of 2026, modestly down from 202 in the prior quarter. As for short interest, bears show limited skepticism towards the stock, with just 1.31% of Broadcom's public float sold short. The company reports fiscal Q3 results on September 2, expecting consolidated revenue to increase 84% year-over-year to $29.4 billion, AI semiconductor revenue to reach $16 billion, and a non-GAAP operating margin of 67%. TD Cowen's rating reflects that Broadcom's pullback from all-time highs doesn't materially weaken its long-term AI thesis. Its growing AI semiconductor revenue and expected deployments support its bull case, but it has to prove that its expanding pipeline can translate into sustained revenue and market-share gains. While we acknowledge the potential of AVGO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock . READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom and Pony AI Is Scaling Robotaxis Fast—Can the Stock Reach BofA's $17 Target? Disclosure: None. Follow Insider Monkey on Google News .

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Broadcom (AVGO) shares have fallen 20% from their peak, but TD Cowen projects a 27% upside, citing soaring AI semiconductor revenue and $30 billion in orders. Q2 2026 AI semiconductor revenue surged 143% year-over-year to $10.8 billion, and the company has secured visibility for over $100 billion in AI semiconductor revenue through 2027. Despite intensifying competition with MediaTek and Marvell and margin pressure factors, investors should focus on long-term AI growth momentum.

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