Broadcom (NASDAQ:AVGO) is one of the stocks Claude AI recently pulled the plug on. Claude’s total return was about 20% since its first purchase in March. The AI agent said it sold the stock because the math no longer worked. Its 12-month expected return on Broadcom had dropped to 5.9%, the 1-month outlook had turned negative, and there was no meaningful catalyst on the calendar before the September 3 earnings report. Claude said that meant holding a high-market-sensitivity semiconductor stock through the July Federal Reserve meeting for two months with nothing scheduled to trigger a re-evaluation. The sale leaves Claude’s portfolio with no direct semiconductor exposure, a move the AI called deliberate.
Note: The stock selection for this article was based on “The Claude Portfolio” account on X, which is associated with Autopilot. The account claims Claude AI has full control of the portfolio, with AI sub-agents triggered when new information or catalysts require updated data. Claude AI, according to the account, operates a real-money portfolio through Autopilot and is responsible for investment decisions.
Why Bulls See This Differently
Many analysts read the same numbers and land on a long-term hold. In fiscal Q2 2026, Broadcom generated $10.26 billion in free cash flow, revenue rose 48% year-over-year to $22.2 billion, and AI semiconductor revenue jumped 143% to $10.8 billion. Management raised full-year AI semiconductor guidance to $56 billion and reaffirmed AI revenue above $100 billion for fiscal 2027. For Q3, the company guided to $29.4 billion in total revenue (up 84% year-over-year), including $16 billion in AI semiconductor revenue, growth of more than 200%.
The bull case isn’t really about chip sales, though. Broadcom disclosed $164.6 billion in remaining performance obligations last quarter. Apple extended its custom silicon and connectivity partnership through 2031 in a deal exceeding $30 billion, covering more than 15 billion US-made chips. Meta’s rollout runs past 1 gigawatt through 2029. OpenAI’s arrangement is arguably the more revealing one: rather than buying standardized Nvidia GPUs, OpenAI is designing its own AI accelerator, Jalapeño, with Broadcom handling implementation, networking, and production — deployment starts in the second half of 2026 and runs through 2029. Bulls argue this positions Broadcom as something structurally different from Nvidia: not a chip vendor competing on price, but a custom-silicon partner that gets embedded in a customer’s architecture years before deployment, which raises switching costs substantially once the system is built around it.
The Valuation Argument, and Its Limits
Some bulls lean hardest on the PEG ratio — at roughly 0.72, below the sector median — arguing that once growth is factored in, the headline forward P/E of about 31.9x overstates how expensive the stock actually is. That view dismisses the AVGO valuation concern outright, betting the AI infrastructure moat justifies the premium.
A more cautious take disagrees on framing rather than facts: it treats Broadcom as a “cyclical compounder,” not a stock trading at a discount, and points out that even the broader S&P 500 is trading slightly above its 5- and 10-year average forward P/E right now — meaning some of Broadcom’s premium reflects a market-wide AI premium, not something unique to Broadcom. That analysis lands on a base case of $500–$525 over 12–18 months, which implies real upside from today’s price near $378, but only if nothing shakes AI sentiment broadly
The Risk Bulls Take Seriously
The concentration risk is real and quantifiable: Broadcom’s top five customers make up about 45% of revenue. In a worst-case scenario where a leasing customer fails to pay, one estimate puts Broadcom’s AI rack exposure at up to $29 billion. There’s also a sentiment risk distinct from a fundamental one. Some reports that Google might develop future TPUs with MediaTek instead of Broadcom moved the stock on reputation alone, showing how quickly the market can question Broadcom’s positioning even without a confirmed customer loss.
Emerald Wealth Partners Growth Equity Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2026 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) delivered another strong quarter. While revenue and EPS both were only slightly above Street consensus, the real highlight was FY2027 guidance for AI revenues, which were well above expectations and have led to analysts upgrading their sales and profit estimates, some of them significantly.
Additionally, at the latest analyst call management proactively and effectively countered investor concerns that have weighed on the stock such as margins risks, competition risks from hyperscalers building their own customer chips (ASICs) and software disintermediation…” (Click here to read the full text)
While we acknowledge the risk and potential of AVGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVGO and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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