Broadcom Stock Analysis: My Final Verdict | AVGO STock Deep Dive Part 5

Parkev Tatevosian, CFA•Jun 13, 2026

Summary

Parkev concludes his deep dive into Broadcom stock by emphasizing that it presents an attractive buying opportunity following recent financial results and a significant sell-off. He increased his fair value calculation for Broadcom to $498 per share, noting that the stock is currently trading just under $390 per share, making it appear undervalued. Parkev highlights several key insights from management's answers to analyst questions.

**Broadcom's Relationship with Alphabet:** The company maintains a strong, multi-generational product agreement with Alphabet, involving substantial intellectual property deployment for Alphabet's proprietary semiconductor chips in its data centers. This partnership is a significant source of revenue and strategic importance.

**Profit Margin Dynamics:** Broadcom's management addressed investor concerns regarding declining gross profit margins. The CFO clarified that this is not a one-off event and will continue due to the faster growth of segments that inherently generate lower gross profit margins, such as ASICs and certain wireless and TPU businesses. However, Parkev notes the positive aspect that the more comprehensive operating profit margin is expected to hold up relatively well and remain stable, indicating that the overall profitability is solid, largely due to a mix shift between software and semiconductors rather than fundamental weakness.

**Accelerating AI Demand:** Parkev points to robust and accelerating demand within the AI ecosystem. While the number of chips might be less, the average selling price per chip is increasing. More critically, the compute capacity, measured by gigawatts for data centers, is growing exceptionally fast, surpassing Broadcom's expectations from six months prior, particularly driven by large language model providers like Anthropic and OpenAI. Management forecasts substantial growth through 2027 and 2028, with 2028 projected to show significant acceleration from 2027 levels. This long-term demand outlook helps alleviate fears of an "AI bubble" bursting soon, as companies are already placing orders and prepayments extending into 2028 and beyond. Broadcom is actively developing custom AI accelerators for these LLM developers and creating a portfolio of critical components to enhance the performance of clustered XPUs and GPUs. The widespread adoption of large language models by hundreds of millions of monthly active users and the emergence of agentic AI further underscore this sustained demand.

**Supply Chain Resilience:** Broadcom's management has expressed confidence in securing sufficient supply for their products to meet demand through 2026 and 2027, and they are already working on securing supply for 2028 and 2029, demonstrating proactive planning to match the anticipated high demand.

Parkev sees the current market price, especially after a recent drop of over 19% across two days, as an attractive entry point for long-term investors to acquire an "excellent company with great margins and great revenue expectations."

Mentioned Stocks

AVGO

Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev increased his expected free cash flow for Broadcom from 2027 onwards and updated his fair value calculation to $498 per share. With the current market price just under $390 per share, he considers the stock undervalued and an attractive buying opportunity for long-term investors, especially after the recent sell-off (down 7.2% today, 12% day before). His positive outlook is supported by Broadcom's strong multi-generational product deal with Alphabet, stable operating profit margins despite pressure on gross margins from a changing business mix, and robust, accelerating demand for AI-related compute capacity from large language models extending into 2028 and beyond. He also notes management's proactive approach to securing supply for future demand.

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