AI stocks may have lost some shine in 2026, but Broadcom (AVGO) management made a surprising revelation during its fiscal 2026 first-quarter earnings call that could change how investors view the company’s position in the AI boom.
Let’s find out what that is and if it’s still not too late to buy AVGO stock.
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During the first-quarter earnings call, CEO Hock Tan revealed that Broadcom is working with six customers on custom AI accelerators, calling the partnerships “deep, strategic and multi-year.” Tan also emphasized how concentrated the business is, stating that the company has “very few customers, six to be precise” for the volume it is driving in AI. Broadcom has never formally revealed the identities of these custom silicon clients. According to industry reports and analyst estimates, the company is collaborating with a number of prominent AI developers and hyperscalers, including Alphabet’s Google (GOOGL), Meta Platforms (META), ByteDance, OpenAI, Anthropic, and Apple (AAPL), on custom AI chips and data center architecture. These companies are among the largest AI infrastructure providers in the world, and many are now creating their own custom chips rather than simply relying on general-purpose GPUs. This is where Broadcom comes into the picture. The company specializes in designing custom AI accelerators, often called XPUs, as well as high-performance networking chips that connect thousands of processors within huge AI clusters.
Management emphasized that Broadcom is already shipping AI accelerators for several of these customers today, and its deployment is expected to grow dramatically in the coming years. This small group of large buyers generated a 29% year-over-year increase in revenue to $19.3 billion. Adjusted earnings rose 28% to $2.05 per share. The semiconductor segment led the way, generating $12.5 billion in revenue, a 52% year-over-year increase. Notably, AI semiconductor revenue increased 106% year-on-year to $8.4 billion. Broadcom expects the pace to continue in the second quarter, generating $10.7 billion. AI networking revenue also increased 60% year-over-year in the first quarter, accounting for one-third of total AI revenue.
Broadcom’s Tomahawk switching chips and high-speed SerDes technology are gaining popularity among hyperscalers developing huge AI clusters. This concentrated group of six AI customers is generating enormous demand, offering Broadcom unusual visibility into future revenue.
The highlight of the earnings call was Broadcom’s long-term outlook for its AI chip business. The company now expects to generate more than $100 billion in AI chip revenue in 2027 alone. This estimate includes revenue from AI accelerators (XPUs), network switches, digital signal processors, and other data center chips.
The important thing to note is that this $100 billion estimate is based on existing customers, meaning the six largest customers, and current infrastructure plans. Future demand could be even higher. Management also highlighted that Broadcom has already secured key supply chain components such as advanced wafers, high-bandwidth memory and substrates through 2028, ensuring it can meet the expected increase in demand.
During the earnings call, Broadcom management hinted at details that could be helpful to investors who are paying attention and still believe in the growth of AI infrastructure. Broadcom said its $100 billion AI prediction by 2027 is based solely on chips, not racks or systems. This means that the total AI opportunity surrounding Broadcom could be significantly larger than that number.
Additionally, AI companies are starting to design chips tailored to their own models, and Broadcom is the partner helping to build them. This will eventually allow the company to quietly take over traditional GPU-based infrastructure over time. Tan hinted that the expansion of AI infrastructure will not slow down and is just entering its next phase. Those who are patient and have a long-term investment horizon can see their investment pay off.
In fact, analyst estimates suggest that Broadcom’s revenue could reach around $104 billion in fiscal 2026 and potentially rise to $150 billion in fiscal 2027, while profits are expected to grow sharply over the next two fiscal years.
For all the benefits and tremendous growth that has propelled Broadcom to become a $1.57 trillion tech giant, this concentration of customers comes with some risks. Broadcom’s dependence on just a handful of customers presents potential challenges that investors should keep in mind.
If one or two key customers change their strategy or reduce their spending on AI, Broadcom may suffer significantly. Large hyperscalers are known for their volatile capital spending cycles, and changes in investment priorities can have a ripple effect throughout the semiconductor supply chain. Additionally, many of these companies are building their own AI chips, which may lead to greater competition in the future.
Overall, the consensus for Broadcom stock is a “Strong Buy” rating. Of the 42 analysts with coverage, 36 rate the stock as a “Strong Buy”, three have a “Moderate Buy” and three recommend a “Hold” rating. AVGO stock is down 2.5% so far this year. Based on the average price target of $446.74, the stock has a 35% upside potential from current levels. Furthermore, the high price estimate of $525 indicates that the stock could gain up to 59% over the next 12 months.
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Broadcom’s deep partnerships with a small group of tech giants have positioned it at the center of the AI arms race, helping to design and supply the custom silicon that will power the next generation of AI systems. However, the same concentration that creates opportunities also brings risks. Investors should now watch whether Broadcom’s role as an architect of custom chips for the AI industry will strengthen over time or whether over-reliance on a few powerful customers causes any problems.
Either way, these six companies will play a major role in shaping Broadcom’s future.
On the date of publication, Sushree Mohanty had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
