BMO sees writing on the wall for Broadcom stock after earnings

Broadcom (AVGO) has become one of the largest companies in the world, worth about $1.75 trillion.

Yet the shares recently pulled back hard, dropping roughly 7% in five trading days and about 25% from their 2026 high.

That kind of drop makes investors nervous. It also gets analysts talking.

Now a new voice has entered with a clear message, and the timing matters.

A fresh rating landed just before Broadcom reports earnings on Sept. 2, a date that could set the tone for chip stocks into the fall.

Here is what the call says, why it arrived when it did, and what everyday investors should take from it.

Why BMO started Broadcom stock at Outperform with a $455 target

On Aug. 21, 2026, BMO Capital Markets began covering Broadcom with an Outperform rating, which is the firm’s version of a buy.

Analyst Harsh Kumar set a price target of $455, according to Barchart.

Kumar has covered semiconductor stocks at BMO for more than a decade. That track record gives his read on Broadcom’s AI position extra weight with investors.

With shares near $368, that target points to more than 25% upside over the next year.

Kumar’s reasoning is simple. He called Broadcom the “leading AI supplier in custom ASIC (XPU) and networking.”

An ASIC is a chip built for one specific job. Companies like Google, OpenAI, and Anthropic use these custom chips to run their AI systems instead of relying only on off-the-shelf processors from Nvidia.

Kumar ranks Broadcom as the No. 2 AI chip company in the world, sitting right behind Nvidia.

Why it’s difficult for rivals to copy Broadcom’s AI business

Broadcom does two things that are tough to replace in an AI data center.

First, it designs custom chips for the biggest tech companies, work it has done for more than a decade. Second, it builds the networking parts that let thousands of chips send data to each other at high speed.

Big AI clusters lose much of their value if the chips cannot share data quickly, and this is where Broadcom’s gear becomes hard to replace.

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That combination is why Kumar sees strong demand locked in for the next two years, TipRanks reported.

Broadcom is working with nearly every major cloud provider and AI lab that is building its own chips. Management has guided toward more than $100 billion in AI chip revenue in fiscal 2027, a number CEO Hock Tan has repeated on earnings calls.

Why the timing of the BMO call matters for AVGO investors

This rating arrived during a stretch of heavy news for Broadcom. The company is in talks to raise more than $60 billion through debt financing, Bloomberg reported, to help finance AI chips for Anthropic and others.

Blackstone and Apollo may take part, and the full package could reach $100 billion.

Here is what that means in plain terms:

Broadcom’s customers need enormous amounts of expensive hardware. This financing helps them pay for it, which helps Broadcom sell more chips.

A bullish rating during that news gives investors a second opinion that the demand behind those deals is real.

BMO started coverage of Broadcom with an Outperform rating days before the company’s Sept. 2 earnings report.

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BMO’s call pushes back against a Google worry

One fear has followed Broadcom for a while, and this fear is that giant customers like Google could design their own chips in-house and stop buying.

BMO’s view cuts against that fear.

Google’s growing spending and rising capacity targets actually increase near-term demand for Broadcom’s systems rather than reduce it.

That said, the risk is not gone.

On Aug. 19, Marvell (MRVL) expanded its own custom-chip deal with Google, a reminder that Broadcom has real competition for this work.

How Broadcom’s numbers back up the bullish case

Narrative aside, the recent results give the thesis something to stand on.

In its fiscal second quarter, Broadcom’s revenue rose about 48% from a year earlier to about $22.19 billion, Broadcom reported.

Profit margins have been recovering as the company folds in VMware, the software business it bought in 2023.

A few things stand out for investors considering the stock:

Key figures behind Broadcom’s setup

Revenue: $22.19 billion in fiscal Q2, up about 48% year over year
AI target: More than $100 billion in AI chip revenue guided for fiscal 2027
Valuation: About 35 times forward earnings, a premium even to Nvidia
Dividend yield: 0.71%, a small but steady payout for long-term holders

The high valuation is the catch. Buyers are paying up today for growth that has not shown up.

Where BMO sits compared with the rest of Wall Street

Interestingly, BMO is one of the more cautious bulls on Broadcom.

The average analyst target sits at $506.29, which points to more than 37% upside from current levels. The consensus rating is Strong Buy.

So BMO’s $455 is bullish, but it is not the highest number on the board.

Mizuho and TD Cowen both carry targets of $500 or more, TradingView reported.

How Broadcom stock stacks up in 2026

For context, Broadcom is still up about 6% year to date even after the recent slide, and it trades well below its 52-week high of $495.

Compared with the broader market, the stock has swung far more than the S&P 500 this year.

That is the trade-off with AI chip names: bigger potential gains, but sharper drops when sentiment turns.

What Broadcom investors should watch next

Several things still need to go right for the bullish case to hold.

Earnings on September 2: Watch whether management raises or reaffirms the $100 billion AI revenue goal for fiscal 2027.
Margins: Look for continued improvement as VMware gets fully absorbed.
Customer concentration: A handful of large buyers drive most of the growth, so any change in their spending matters a lot.
Regulation: The European Commission is still pressing Broadcom over VMware, which could create friction.

For long-term investors, BMO’s call is a good reason to keep Broadcom on the watch list going into the earnings report.

For anyone chasing the stock at 35 times forward earnings, the smarter move may be to wait for the Sept. 2 report before committing new money, since that is when the demand story gets tested with fresh numbers.

None of this is a guarantee, and the stock’s recent swings show how fast sentiment can shift. Do your own research and size any position to a level of risk you are comfortable with.