AVGO Stock Gains 4% as OpenAI Financing Gap Tests Broadcom’s AI Infrastructure Thesis

Quick overview

Broadcom (NASDAQ: AVGO) is at the crossroads of the most exciting growth story in the market and its biggest growing peril. The 4.23% rise on May 8 reflects the former – broad semiconductor sector enthusiasm, Intel’s blowout earnings offering sector-wide confidence, and Broadcom’s own recent relationship expansions with Google, Anthropic and Meta. The latter is represented by the OpenAI financial challenge, which is worth considering closely.

Broadcom Stock Is Caught Between Two Narratives

Here’s the thing that happened: OpenAI and Broadcom struck a deal for 10 gigawatts of unique AI accelerators, built by OpenAI and manufactured by Broadcom. The first phase, called “Project Nexus,” requires $18 billion to fund 1.3 gigawatts of data center capacity. OpenAI can’t afford that first phase now, after missing fresh user and revenue targets recently, Barchart said. But Microsoft, its lead backer, doesn’t seem ready to step up to this particular obligation.

The existential challenge for Broadcom isn’t immediate – the firm has a lot of diversification in hyperscaler relationships, infrastructure software and networking. But if demand from OpenAI falls short, it becomes a pressing matter of who will fill the void for a Q2 semiconductor industry forecasting $14.8 billion in sales, of which $10.7 billion comes from AI chips.

AVGO’s Fundamentals Remain Strong

Beneath the headlines around OpenAI, Broadcom’s underlying business is humming along. Q1 FY2026 revenue of $19.3 billion was divided $12.5 billion from Semiconductor Solutions and $6.8 billion from Infrastructure Software — the latter being a direct consequence of the 2023 VMware purchase that has considerably diversified the company’s revenue mix.

Broadcom has a high margin product portfolio. Gross margin is 77% and Adjusted EBITDA is $13.1 billion (68% of revenue). The corporation completed the quarter with $14.2 billion in cash. Q2 guidance of around $22 billion in consolidated revenue equates to 47% year-over-year growth – a figure that assumes the AI chip pipeline holds for now.

VMware Cloud Foundation 9.1, which was released May 5, also adds a software catalyst that delivers up to 40% server cost savings for mixed AI and non-AI workloads and 39% reduced storage total cost of ownership for AI data pipelines, the company said. As corporations accelerate investment in AI infrastructure, the role of VMware as the operational layer for such installations becomes ever more valuable and even more shielded from the hardware revenue volatility that the OpenAI situation brings.

Burry’s Bubble Warning Adds a Macro Overlay

Broadcom’s rise comes as Michael Burry issues his most stark market warning in years. “Feeling like the last months of the 1999-2000 bubble,” Burry commented on Substack on May 8. “He was particularly concerned about the Philadelphia Semiconductor Index, which is up 65% year-to-date and over 10% in a single week, drawing a direct parallel to the parabolic gains technology stocks made before the collapse in March 2000.

Burry has apparently backed up this stance with January 2027 put options on the iShares SOXX ETF, betting on a loss of almost 30%. The qualitative warning gets quantitative substance from the Shiller CAPE ratio at 40.1 – levels seen only at the dot-com peak.

But Paul Tudor Jones, who used the same comparison back in 1999, came to a different conclusion: the rally could have one or two more years to run. That divide is emblematic of the central dilemma in semiconductor investing today – the fundamentals are real but the speed and extent of the repricing could be pricing in more than the next few quarters can provide.

AVGO Stock Technical Picture: Extended but Momentum-Driven

AVGO has increased roughly 22.64% in the last month, outperforming the S&P 500’s return of 9.11%. The stock is trading substantially above its main moving averages, with the 20-day, 50-day and 200-day SMAs all comfortably below the current price of $430. Broadcom is a big holding in the SOXX ETF, which is trading at 60% above its 200-day moving average, a level of extension that historically has resolved by either extended consolidation or a stronger fall.

AVGO has key support around the $395-$405 area, which was resistance earlier in the year before the April breakout. The $370-$380 area represents deeper support on a larger pullback. On the positive side, the average analyst estimate of $469.94 gives a medium-term reference, and the high objective of $630 reflects the most bullish scenario of execution for AI chip sales.

Will Broadcom (AVGO) Rally in 2026?

Broadcom is up 4% which is a reflection of a semiconductor industry which is moving at a blistering pace and the company has a real and defensible core position in AI infrastructure. The OpenAI finance gap is a real risk to near-term revenue expectations, but not necessarily a structural concern given Broadcom’s broad hyperscaler partnerships.

Traders should pay attention to the $395-$405 zone for any downturn that is driven by OpenAI headlines or general semiconductor sector rotation. The positive momentum structure would remain intact above $415. The Burry warning is a macro risk to monitor, not a perfect timing signal — but the CAPE ratio at 40.1 and a 65% year-to-date SOXX gain mean the margin of error in semiconductor values is diminishing.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

From Detroit to Data Centers: Ford's Quiet Pivot Into the AI Power Business Drives F Up 13%

2 hours ago

Save

The $99 Billion CRWV Bet: Why CoreWeave Is the Most Contracted Stock in AI Infrastructure

5 hours ago

Save

Nebius Stock Explodes 15.7% Higher as AI Data Center Demand Drives Massive Revenue Growth

5 hours ago

Save