Broadcom Shares Face Selling Pressure Amid Record AI Backlog

Broadcom US11135F1012

Despite reporting a record-breaking pipeline of orders, shares in semiconductor giant Broadcom have encountered significant selling pressure. The stock declined nearly 5% on Monday, extending a period of weakness. Analysts point to broader sector-wide anxiety, fueled by renewed geopolitical tensions between the U.S. and Europe, rather than company-specific fundamentals, as the primary driver.

Technology stocks, including those within the "Magnificent Seven" cohort to which Broadcom belongs, traded lower this week. The sell-off was triggered by investor concerns over potential new trade conflicts after U.S. political commentary regarding Greenland. This prompted a widespread move to de-risk portfolios, impacting major tech equities.

Broadcom's stock currently trades around $332.80, marking a one-week loss of approximately 6.2%. This level remains substantially below its 52-week high of $414.61, even though the shares had appreciated roughly 50% for the full 2025 fiscal year.

Unwavering AI Growth Narrative

Beneath the short-term price action lies a robust growth story. The company has cemented its role as a premier supplier of custom artificial intelligence chips to hyperscale cloud providers, securing multi-billion dollar agreements with Alphabet, OpenAI, and Anthropic.

Recent financial data underscores this powerful momentum:

• Q4 2025 AI Revenue: $6.5 billion, representing a year-over-year increase of 74%.
• Total AI Semiconductor Backlog: $73 billion.
• Anthropic Contract Value: $21 billion alone.
• Q1 2026 AI Semiconductor Forecast: $8.2 billion, which would double the prior-year period's result.

Reflecting this optimism, Wells Fargo recently upgraded the stock to "Overweight" with a $430 price target. Their analysts project AI semiconductor revenue will reach $52.6 billion in 2026 and $93.4 billion in 2027, equating to growth rates of 116% and 78%, respectively.

Analyst Consensus Remains Bullish

The broader analyst community maintains a positive outlook. Of the 42 covering analysts, 36 recommend buying the shares. Mizuho analyst Vijay Rakesh raised his price target from $450 to $480. The average price target stands at $455.22, implying an upside potential of roughly 29% from current levels, with the most bullish target sitting at $535.

This optimism is baked into a demanding valuation. Broadcom trades at a price-to-earnings (P/E) ratio of 72, well above the industry average of 43.4. Such a premium leaves little room for operational disappointments.

Key Risk Factors to Consider

Beyond its rich valuation, several other risks warrant attention. A high dependence on a concentrated customer base introduces vulnerability to order fluctuations. Furthermore, manufacturing capacity at partner TSMC is constrained, which provides predictability but can also lead to supply bottlenecks. Geopolitical uncertainties, particularly relating to China, add another layer of complexity.

Notably, company insiders have executed 13 separate stock sales over the past three months. Fundamentally, the balance sheet remains solid, featuring a current ratio of 1.71 and a debt-to-equity ratio of 0.8. The firm has a 15-year history of raising its dividend, which currently yields $2.60 per share annually.

The present pullback follows an exceptionally strong fourth quarter for fiscal 2025, where Broadcom significantly surpassed expectations. Revenue climbed 28% to $18.02 billion, while adjusted earnings per share jumped 37% to $1.95. For the current quarter, management has guided for revenue of $19.1 billion and an EBITDA margin of 67%.