AVGO Stock Tests the $400 Support Despite Broadcom’s Price Target Increase to $500 by Citi analysts

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Broadcom surged to record highs last week on expanding infrastructure partnerships, but concerns about aggressive spending, financing gaps, and elevated valuations have triggered a pullback in recent sessions, despite Citi increasing the Broadcom stock price target.

Citi has raised its price target on Broadcom to $500 per share, up from $475, ahead of the company’s fiscal second-quarter earnings due on June 3. The bank kept its Buy rating and named AVGO its top semiconductor pick for 2026.

Broadcom Pulls Back After Record High

Broadcom shares reached an all-time high of $437.68  last week as investors continued to pour into AI infrastructure leaders. However, the rally has weakened quickly, with the stock falling roughly 6% earlier today, although it trimmed some of the losses as the avgo stock price approached the $400 support level back into focus.

The pullback reflects growing caution after months of aggressive gains across semiconductor and AI-related stocks. While Broadcom remains deeply embedded within the AI ecosystem, investors are increasingly questioning whether infrastructure spending expectations have become too optimistic.

The company’s market capitalization briefly climbed above $2 trillion earlier this week before easing back toward $1.99 trillion. Even after the decline, Broadcom continues to trade at a rich valuation, with a trailing price-to-earnings ratio above 80.

The Tuesday dip comes despite significant infrastructure news. On Friday, Bloomberg reported that Apollo Global Management Inc APO and Blackstone Inc BX are discussing a $35 billion financing package with Broadcom.

OpenAI Financing Concerns Shake Sentiment

Part of the recent pressure emerged after reports that OpenAI is struggling to secure roughly $18 billion in financing linked to its custom chip partnership with Broadcom.

The funding gap reportedly affects an early stage of a large-scale multi-year accelerator rollout involving OpenAI-designed chips. The project is central to OpenAI’s effort to reduce dependence on NVIDIA hardware and establish a more vertically integrated infrastructure strategy.

The broader agreement, first outlined in late 2025, envisioned a massive hardware expansion potentially worth hundreds of billions of dollars across chips, networking, energy systems, and data centers.

However, the financing concerns highlight a growing issue across the AI sector: infrastructure ambitions may be expanding faster than available capital.

Investors are beginning to question how sustainable these spending levels will remain if economic conditions tighten or monetization takes longer than expected.

Technical Analysis – The Lower Highs Continue

Broadcom entered the new year on uncertain footing, with its share price dipping below $300 as confidence across the semiconductor complex began to fray. After months of near-uninterrupted gains, investors have turned more defensive, questioning how much is already priced into leading infrastructure names.

AVGO Chart Daily – Returning Above the 100 SMA

The bearish momentum continued and AVGO shares fell last month, slipping below $300 by the end of March, threatening to break the 200-day simple moving average (red) which has acted as support before. However we saw a strong rebound after the earnings, taking the stock to $406.83, but buyers couldn’t push the AVGO stock price to a new record high and today it fell under $400. Although buyers returned this week and pushed AVGO to a new record above $437, but has made a swift reversal in the last two days and is testing the 20 SMA at $400 now.

Strategic Partnerships Continue to Support Growth

Despite the recent pullback, Broadcom’s long-term position within AI infrastructure remains strong.

The company maintains deep relationships with major technology firms including Alphabet, Meta Platforms, Microsoft, and emerging AI players such as Anthropic. These partnerships continue to reinforce Broadcom’s importance in custom chip design, networking, and advanced data center connectivity.

Broadcom’s agreement with Alphabet extends through 2031 and includes support for Google’s tensor processing units and networking infrastructure. Meanwhile, its partnership with Meta focuses heavily on custom accelerator chips for large-scale AI training and inference systems.

The company has also expanded beyond semiconductors into network observability and cloud infrastructure management through technologies such as AppNeta.

These relationships provide strong long-term revenue visibility and position Broadcom as one of the key suppliers powering the next generation of AI computing.

Valuation and Competitive Risks Remain Elevated

Even with strong fundamentals, risks are becoming harder for investors to ignore.

Competition across AI hardware is intensifying as hyperscalers increasingly develop in-house chips and custom architectures. Companies are actively searching for alternatives to NVIDIA dominance, creating both opportunity and pricing pressure within the sector.

At the same time, Broadcom’s elevated valuation leaves little room for operational disappointments or slower infrastructure spending growth. The recent reversal suggests markets are becoming more selective after an extended rally in AI-related stocks.

While Broadcom remains strategically important within the AI ecosystem, the sharp pullback highlights how quickly sentiment can shift when expectations become stretched.

Broadcom Q1 FY2026 Results: Strong Growth Across Revenue, Profit and Cash Flow

Broadcom reported solid first-quarter results, with revenue rising 29% year-over-year. The semiconductor segment led growth, with revenue up 52% as demand for advanced chips and networking solutions accelerated.

Chip revenue reached $8.4 billion, driven by hyperscale data center investment in AI infrastructure. CEO Hock Tan expects AI semiconductor revenue to climb further next quarter, reinforcing a strong growth trajectory.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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