Broadcom’s $2 Trillion Milestone Fades Fast as Valuation Fears and Sector Jitters Converge

Broadcom's market cap briefly hit $2 trillion before a 4.4% drop, as analyst downgrade and OpenAI concerns cool momentum despite strong AI chip wins.

Broadcom’s ascent into the exclusive $2 trillion market-cap club lasted only a matter of days before the skeptics moved in. The stock touched an all-time high of €360.45 on the heels of Google’s latest chip reveal, only to shed roughly 4.4% in a single session after a Wall Street Journal report flagged potential growth hiccups at OpenAI. The whipsaw has left the shares trading around €344.15—about 4.5% below that record peak, but still 16% above the 50-day moving average.

Seaport Research added to the pressure on April 28, downgrading the stock to “Neutral” on the grounds that the recent rally has eaten up most of the near-term upside. The call came as the broader semiconductor complex slumped more than 3% that same day, dragging down Nvidia, AMD, and Micron alongside Broadcom. Over the past seven sessions, the stock has dropped roughly 4%, and the relative strength index has tumbled from overbought territory above 74 to a more subdued 36—a clear sign the momentum has cooled.

The Google Catalyst That Sparked the Rally

The run-up to the all-time high was powered by Google’s unveiling of its eighth-generation Tensor Processing Unit, which for the first time splits the architecture into two distinct chips: the TPU 8t for training large AI models and the TPU 8i for memory-intensive inference tasks. Broadcom played a key role in co-developing both designs, reinforcing its status as the go-to partner for hyperscaler custom silicon. CEO Hock Tan had telegraphed this shift during the last earnings call, noting that clients would increasingly commission two chips simultaneously—one for each workload. For Broadcom, that translates directly into more design revenue.

The company’s custom-chip client roster now stands at six confirmed names: Google, Meta, ByteDance, Anthropic, Fujitsu, and OpenAI. A newly disclosed multi-year agreement with Anthropic calls for the AI firm to deploy several gigawatts of TPU computing capacity starting in 2026 and 2027.

Debt and Valuation Weigh on Sentiment

Despite the strategic wins, the balance sheet remains a source of concern. Broadcom carries roughly $66 billion in debt, a legacy of the VMware acquisition, and the stock trades at a trailing price-to-earnings ratio of about 82. That rich multiple leaves little room for error, especially with European regulators still reviewing VMware’s licensing practices.

The sell-side remains broadly bullish: 94% of the 54 analysts covering the stock rate it a buy, and the average price target implies more than 13% upside. Earnings per share are expected to compound at an annual rate exceeding 48% over the next five years. But the near-term narrative has shifted from growth acceleration to valuation discipline.

Revenue Trajectory Still Points Up

Broadcom’s first fiscal quarter of 2026 delivered $19.31 billion in revenue, a nearly 30% year-over-year increase. The semiconductor segment alone surged more than 52% to $12.51 billion, almost entirely driven by AI demand. Within that, the AI chip business generated $8.4 billion—up 106% from the prior year.

Management has guided for roughly $22 billion in second-quarter revenue, which would represent 47% growth. Longer term, the company sees its AI chip revenue crossing the $100 billion mark by 2027.

The capital return program adds a floor under the stock: $10.9 billion flowed back to shareholders in the first quarter through dividends and buybacks, and a newly authorized $10 billion repurchase program is set to run through the end of 2026. Whether that’s enough to bridge the valuation gap will likely become clearer when Broadcom reports its next quarterly results in June.