On August 4, Broadcom (NASDAQ:AVGO) said its software business had joined NVIDIA (NASDAQ:NVDA) and other industry partners as a founding member of the Open Secure AI Alliance, an effort to build open, collaborative defenses against AI-driven cyberattacks. It is a modest headline next to the numbers coming out of Broadcom’s chip business, but it hints at where the company sees itself heading: not just building the AI boom’s hardware, but helping secure it.
Bull Case: A Chip Business Growing Faster Than Anyone Expected
When Broadcom reported fiscal second quarter results in early June, CEO Hock Tan reiterated that AI semiconductor revenue should top $100 billion in fiscal 2027, more than the company’s trailing 12-month revenue of about $75 billion. That target looks more believable every quarter. AI semiconductor revenue reached $10.8 billion in the quarter, up 143% year over year, and Broadcom guided for growth to accelerate past 200% year-over-year in its fiscal third quarter, to $16.0 billion. Total revenue for the quarter rose 48% year-over-year to $22.2 billion, semiconductor solutions revenue climbed 79% to $15.0 billion, and free cash flow reached $10.3 billion, or 46% of revenue.
Broadcom’s enterprise software arm is quieter but steady, with infrastructure software revenue up 9% to $7.2 billion in the same quarter. The August 4 alliance announcement fits that side of the business: Broadcom said it has been among the top contributors to Kubernetes for the past decade and is the steward of widely used open source software including Spring, RabbitMQ, and Salt, and it has built AI models into its own security engineering work, covering vulnerability discovery, exploit validation, and patch generation. Shares are up more than 20% so far in 2026, outperforming the broader market.
Bear Case: The $100 Billion Target Rests On Very Few Names
Tan has said six core custom chip customers drive the AI semiconductor business, and Google, Meta, Anthropic, and OpenAI are among them. In December, Tan said Anthropic alone had placed a $10 billion order. Spread across six customers, the fiscal 2027 target implies more than $16 billion apiece, and the list is not growing: two other core customers have placed purchase orders totaling just $6 billion so far, with shipments starting late this year. That business is also built on capital projects that tend to move on similar timelines. If two of the six customers paused orders at once, whether demand disappointed or a budget cycle turned, there is no long list of smaller buyers underneath to absorb the gap. Tan has also noted that bookings are not for immediate delivery, and customers still have other infrastructure pieces to put in place before chips ship, so a single delayed project could push billions in revenue into a later year.
What The Positioning Data Shows
Hedge fund ownership of Broadcom fell from 202 funds to 173 in the most recent quarter, a pullback that runs against the stock’s 20% gain this year. Short interest sits at just 1.47% of the float, showing little organized skepticism toward the stock. As of August 11, shares trade at 22.62x forward earnings, a multiple that assumes the AI ramp continues roughly on schedule.
Where This Leaves Investors
Broadcom is executing on nearly every number it has put in front of investors, and its push into securing the AI systems it helps build adds a layer to the story beyond chips. But a $100 billion forecast built on six customers is a different kind of bet than one spread across thousands of buyers. For the growth case to hold, those six relationships need to keep expanding on schedule. For the risk case to matter, just one or two would have to slip.
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