Broadcom's recent sharp surge in share price has raised concerns about profit-taking, as market worries over its high valuation and potential slowdown in future growth are intensifying ahead of its earnings release, despite the semiconductor sector’s historic rally driven by AI demand.
$Broadcom (AVGO.US)$ The company's stock has surged relentlessly in recent sessions, adding over $280 billion in market capitalization in just the past four trading days. However, with earnings set to be released after the market close, investors may now assess whether this rally has gone too far.
Stock Surges Ahead of Earnings; Market Worries About Profit-Taking
“It’s hard to say right now whether we’ve overreacted, but there’s definitely a risk of profit-taking,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, which manages approximately $11 billion in assets and holds Broadcom shares. “It’s not that there’s anything wrong with the company, but we’ve seen massive gains, and people will want to lock in profits—especially if they’re worried about a repeat of the sell-off earlier this year. Volatility is very high right now.”
Broadcom’s stock is recovering from a period of weakness several months ago, having declined 23% between early December last year and the end of March this year, and hitting a low on March 30—the lowest since 2026. It has since soared 64%, making it the third-largest contributor by points to the S&P 500’s 20% gain, trailing only $NVIDIA (NVDA.US)$and$Apple (AAPL.US)$ 。
These gains are part of a historic rebound in semiconductor stocks, fueled by surging chip spending in the artificial intelligence sector. The Philadelphia Semiconductor Index has risen 94% in 2026, on track to deliver its best annual performance since 1999. $Amazon (AMZN.US)$ 、 $Meta Platforms (META.US)$ , Alphabet, and $Microsoft (MSFT.US)$ are expected to spend as much as $725 billion on capital expenditures this year alone.
However, some Wall Street professionals have begun questioning whether all these spending commitments will ultimately yield results. On Tuesday, Alphabet’s stock dropped after the company announced a rare move to raise $80 billion through a series of equity offerings—one of the largest equity transactions in history. Alphabet also happens to be one of Broadcom’s biggest customers, accounting for nearly 13% of its revenue. “This confirms they won’t be slowing down spending anytime soon,” Ghriskey said. “But can they afford even more? Both spending capacity and the pace of corporate growth are limited.”
Given that rising capital expenditures are key to Broadcom’s continued rally, some investors are growing concerned about the scale of these investments. Chipmakers have historically been cyclical, often experiencing alternating booms and busts. That’s why, despite this AI cycle being larger and longer than previous ones, speculation remains widespread in professional investment circles that the market could still enter a downturn. “I’m confident the AI transformation is coming,” said Elliott Parker, CEO of venture capital firm Alloy Partners. “But there’s also a scenario where the transformation doesn’t happen as quickly as expected, and chip customers don’t strike gold—then we’ll start to see the rally wobble.”
Wall Street analysts expect Broadcom’s revenue for the second fiscal quarter ended April 30 to increase by more than 47%, up from 20% a year earlier. Net profit is forecast to rise by 67%. Analyst sentiment has also grown increasingly optimistic: over the past three months, their earnings-per-share estimates for Broadcom’s fiscal year 2026 have been revised upward by 11%, and those for fiscal year 2027 have jumped by 33%. Meanwhile, options markets are pricing in heightened volatility, with traders expecting a potential two-way swing of 7.8% in Broadcom’s share price following the earnings release—above its average move of 5.3%.
So far this year, betting against AI winners around earnings season hasn’t paid off. Chip stocks such as Intel (INTC.US), Micron Technology (MU.US), Advanced Micro Devices (AMD.US), and Texas Instruments (TXN.US) have all soared after reporting results that confirmed they remain on a strong growth trajectory. Dell Technologies (DELL.US) and HP Inc (HPQ.US), which manufacture computing equipment for AI data centers, also surged sharply after releasing their earnings.
Valuations Already Priced In? Upside May Be Limited
What makes Broadcom’s case unique is that it appears to be approaching a near-term peak in growth. The company is expected to record 62% revenue growth in fiscal year 2026 ending in October, but that growth rate is projected to slow to 58% in 2027 and further decline to 24% in 2028. Net profit shows a similar trend.
‘The market still expects conditions could turn out better than current guidance suggests,’ said Eric Gerster, Chief Investment Officer at AlphaCore Wealth Advisory. The stock is by no means cheap, trading at a forward price-to-earnings ratio of 32x for the next 12 months—significantly above its 10-year average of 18x. By comparison, the semiconductor index trades at a forward P/E of 28x, while NVIDIA’s stands at 22x. Broadcom remains a Wall Street favorite: of the 59 analysts covering the stock, 56 recommend buying it, and none advise selling. However, their average 12-month price target is $480.56, compared with Tuesday’s closing price of $481.57, implying minimal upside potential.
All of this encapsulates the stock’s current market position. Regardless of whether it is viewed as a good or bad long-term bet, the immediate question for investors is: after such an extraordinary rally, does it still have enough fuel left in the tank to keep moving forward?
‘I don’t know what else they could possibly say to make this story any better,’ said Luke Rahbari, portfolio manager at Rational Equity Armor Fund, which holds Broadcom shares. ‘I’m wondering if Broadcom might become one of the first chipmakers whose potential has already been fully realized—its revenue guidance meets expectations, it’s running at full capacity, and there are no more engines left to ignite.’
Of course, Broadcom is also actively taking steps to strengthen client relationships and create financial interdependence. According to reports from late last month, Apollo Global Management and Blackstone jointly arranged approximately $36 billion in debt financing for Anthropic to support its large-scale procurement of Google’s TPU chips, which Anthropic will lease and use. Broadcom, which assisted Google in developing these chips, will guarantee the majority of the transaction. This deal is poised to become one of the largest private credit transactions in history and the biggest debt-financed chip deal to date. Broadcom’s move represents a significant step in proactively assuming risk across the supply chain, and forging closer financial ties with the current ‘Big Three’ large-model developers could expand Broadcom’s strategic horizons.
Editor/Lambor