AVGO Stock’s 27% Selloff Is Sending A Signal – But Morningstar Sees AI Demand Getting Stronger Through 2030

• The research firm expects large revenue ramps from OpenAI and Anthropic to drive growth and help diversify AI business beyond Google.
• Broadcom expects AI semiconductor revenue to reach about $115 billion in fiscal 2027, and potentially double to $230 billion in 2028.
• Morningstar maintained its $650 fair value estimate on Broadcom and called the company one of its top semiconductor picks.

Broadcom (AVGO) remained in focus on Friday after Morningstar backed the chipmaker’s long-term AI outlook, saying its 2028 guidance is credible despite investor skepticism amid a sharp selloff over the past few months.

Broadcom shares have fallen roughly 27% from their June highs, a decline Morningstar suggests reflects investor expectations that the company will either miss its guidance or see growth slow thereafter. 

However, the research firm believes that demand for underlying AI infrastructure will continue to rise through 2030.

AVGO shares were up 1.1% in pre-market trading, on track to snap a three-session loss-making run.

Morningstar Sees AI Growth Enduring

Morningstar maintained its $650 fair value estimate on Broadcom and called the company one of its top semiconductor picks. The firm said Broadcom’s 2028 outlook exceeded its own estimates and expects demand for the company’s AI chips to remain strong, if not accelerate, over the next two years.

Broadcom expects AI semiconductor revenue to reach about $115 billion in fiscal 2027, roughly double the $58 billion expected this year, before potentially doubling again to $230 billion in 2028.

Morningstar expects “massive revenue ramps” from OpenAI and Anthropic to drive much of that growth and help diversify Broadcom’s AI business beyond Google. It also believes Broadcom’s multiyear relationship with Google supports the durability of its TPU business.

Q3 Earnings Beat Street Estimates

Broadcom reported third-quarter revenue of $29.6 billion, up 86% year-over-year and above Wall Street expectations of $29.4 billion, according to Fiscal.ai. Earnings of $3.32 per share also topped estimates, while AI semiconductor revenue surged 221% to $16.7 billion.

The company guided Q4 revenue to about $34.8 billion, representing 93% year-over-year growth.

Morningstar isn’t alone in seeing more AI growth ahead. BMO Capital raised its price target to $575 from $455 while maintaining an ‘Outperform’ rating, pointing to Broadcom’s relationships with six major AI customers and particularly aggressive capacity expansion by OpenAI and Anthropic.

Retail Remains ‘Extremely Bullish’

Retail sentiment for AVGO on Stocktwits remained ‘extremely bullish’ over the past 24 hours, amid ‘extremely high’ message volumes.

One user said Broadcom is “much more than a chip maker,” while adding, “for drawdowns like this one, having higher conviction helps me to ride it out.”

The stock has gained more than 3% so far this year.

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