Artificial intelligence is continuing to boost demand for Broadcom's chips, TD Cowen analysts told clients after meeting with the company. Analysts led by Joshua Buchalter reiterated a buy rating and $450 price target over the next 12 months on Broadcom shares, suggesting 35% potential upside against Tuesday's close. Broadcom has recently stalled after scoring massive gains over the past few years, with shares down roughly 3% over the past three months and 4% in 2026 alone. The downbeat sentiment comes as fears have grown about margin compression, a dip in Broadcom's AI order backlog, the stock's lofty valuation and, more broadly, a potential bubble in the stock market that could tear apart the biggest leaders of the AI trade. For all that, Palo Alto, California-based Broadcom remains 39% higher over the past year. Broadcom executives laid those concerns to rest in a recent virtual meeting with TD Cowen, however. The meeting, in which TD Cowen hosted the company's CEO Hock Tan and CFO Kristen Spears, assured analysts that demand is not only growing for Broadcom's XPUs, but also for its networking business, where the company holds a leading position in a variety of components needed to build AI infrastructure. That includes Ethernet solutions, PCI Express switches used to connect hardware components inside computers and optical interconnect solutions. "Mr. Tan expressed clear confidence in meaningful upside to its most recently disclosed backlog figure, including networking, and that customer owned tooling is not a major concern," Buchalter said in a report issued Tuesday, adding that Tan "emphasized that Broadcom has seemingly insatiable demand for its products." AVGO 1Y mountain Broadcom stock performance over the past year. Broadcom management noted in the meeting that its bookings have grown meaningfully since the company's disclosure in December that it had a backlog of $73 billion that it expected shipping over the next 18 months. Although Buchalter said Broadcom's multi-year chip production deal with OpenAI was likely not included in that figure, he said Tan appeared "fully confident" in the deal being deployed between 2027 and 2029. Broadcom's AI networking sales are also likely to become a larger part of total revenue than investors expect, TD Cowen said. "We think the scale of Broadcom's networking business within its AI backlog is underappreciated, with Mr. Tan suggesting meaningful momentum across scale up and scale out in its Tomahawk franchise," Buchalter wrote. "We believe XPU sales continue to drive the bulk of AI revenue sales (and the stock). However, we think AI networking will remain a critical part of both Broadcom's business and cluster buildouts as performance requirements continue to move higher," he continued.
