Is Broadcom Stock Ready For An AI Slowdown?
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Broadcom (AVGO) management expects AI chip revenue to double again in fiscal 2027, to about $115 billion. On the September 2, 2026 call, the question came up whether AI labs whose funding depends on outside cloud providers will give Broadcom that business. That AI growth may be what holders are paying for: the stock trades at 41.3 times its earnings over the last four fiscal quarters, against 22.3 for the S&P 500. So how much of Broadcom would an AI slowdown reach?
More Than Half Of Broadcom’s Sales Come From AI
AI chips brought in 56% of Broadcom’s revenue in fiscal Q3 2026, up from 49% in the quarter before. Those sales go to a short list of buyers, among them Google, Anthropic, OpenAI and Meta, and management said it has only six customers to deal with. So a pullback by a few of them would hit the AI business first, and that business now brings in most of Broadcom’s revenue.
The question on the call was about the AI labs among those buyers. The worry was that the cloud providers they rely on might choose different chips. Management agreed that, for now, they run their models on third-party cloud services, but expects them to run their own data centers over time. It also said Anthropic is on track to become its largest customer for custom AI chips in 2027. Nothing had slowed by that call: management raised its fiscal 2026 AI revenue outlook to $58 billion, from $56 billion.
What An AI Slowdown Would Cost Broadcom Holders
If AI sales simply stopped growing, the first cost would fall on the share price rather than on profit. At today’s price, the stock trades at 30.2 times Broadcom’s fiscal Q3 2026 net income multiplied by four, which is what it would earn in a year if that quarter simply repeated. In that case, a holder would have at risk the part of the price paid for growth beyond that quarter. The stock has fallen hard before: in the 2025 tariff shock, the value of a $10,000 holding in Broadcom fell to about $6,400 at its low, against about $8,100 for the same sum in the S&P 500. Each figure counts from its own peak during that shock to the later low.
The second cost could reach Broadcom’s own cash. In June, Broadcom formed a platform with outside financial partners to fund computing capacity for OpenAI and Anthropic. Management said it may provide modest residual value guarantees, which are promises on what the underlying assets will be worth, and views these guarantees as low risk. On the call, management confirmed that the guarantees already in place on the first tranche, which funds Anthropic’s 1 gigawatt deployment, carry a maximum exposure of about $29 billion. Broadcom had nothing new to announce on guarantees for later deals. That maximum equals about three quarters of the $39.4 billion of free cash flow Broadcom generated over its last four fiscal quarters.
What Broadcom Has Beyond Its AI Chips
Broadcom’s biggest business outside AI chips is infrastructure software, which brought in $8.8 billion in fiscal Q3 2026, up 29% from a year earlier. Its other chips for broadband, server storage and wireless added $4.2 billion, up 5%.
Broadcom also carries its debt comfortably: operating income covered interest expense 13.9 times over its last four fiscal quarters. Net debt, total debt minus cash, was $35.4 billion at the end of fiscal Q3 2026, less than one year of free cash flow. So Broadcom’s debt is well covered, and the price paid for AI growth is what a slowdown would put at risk first.
Management does not expect a slowdown, and said on the call that demand exceeds its fiscal 2027 outlook. AI semiconductor revenue, measured against management’s $21.7 billion guide, is the number to watch when Broadcom reports fiscal Q4 2026, expected in December 2026.
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