Broadcom’s AVGO Selloff Deepens as Investors Question Margin and AI Visibility

Broadcom’s AVGO stock slid about 9% over the past month, trailing the broader technology sector, as investors grappled with what they described as a softer-than-expected near-term setup for the company’s AI pipeline.

A key pressure point, according to coverage carried on TradingView, was Broadcom’s outlook for profitability. The company guided for gross margin to fall to 74% in the third quarter of fiscal 2026, down from 77.1% in the fiscal second quarter. The margin decline was linked to a shift in revenue mix toward lower-margin AI semiconductor sales, raising questions about how quickly profit can scale as AI demand grows.

The selloff also reflected expectations about how much Broadcom’s longer-term AI story would change. TradingView reported that Broadcom raised its forecast for fiscal 2026 AI semiconductor revenues to $56 billion and reiterated expectations for more than $100 billion in AI revenues in fiscal 2027. Still, the update was not viewed as an adequate step-up relative to bullish assumptions, particularly after Broadcom highlighted strong momentum in AI orders.

Broadcom’s AI demand narrative has centered on hyperscale customers. TradingView said the company’s AI growth is concentrated among roughly six large customers, citing Google, OpenAI, Anthropic, and Meta Platforms among them. The report also pointed to management characterization of AI demand as “insatiable” and referenced Broadcom’s record $30 billion in quarterly AI bookings, factors that have helped sustain confidence in the business over the past year.

Even with that demand backdrop, investors are watching for execution risk. TradingView flagged that elevated expectations can cut both ways, meaning any delay in AI deployment schedules, power availability constraints, customer spending moderation, or supply chain frictions could weigh on results. That risk framing matters because Broadcom’s AI revenue ramp is increasingly seen as dependent on a relatively small set of buyers and their infrastructure build-outs.

The stock reaction was also tied, in the same coverage, to concerns that Broadcom’s broader software segment is not keeping pace with the AI semiconductor surge. TradingView noted that infrastructure software grew 9% year over year in the second quarter, which it contrasted with the rapid growth trajectory cited for AI semiconductor revenues.

Company context matters here because Broadcom’s valuation and investor sentiment have become tightly linked to the AI build cycle. As AI spending concentrates around large data center customers, chip and networking suppliers like Broadcom often face a dual test: deliver fast revenue growth while maintaining the margins investors assume will follow scale.

What Broadcom did not disclose in the TradingView piece is as important as what it did. The post does not provide detailed segment-by-segment guidance, customer-by-customer revenue breakdowns, or a quantified forecast for how quickly gross margin might rebound beyond the third quarter target. It also does not elaborate on whether the margin pressure is expected to be temporary or structural, beyond the stated mix impact. That gap leaves room for differing interpretations of how much of the margin decline is a short-term product mix effect versus a longer-term profitability constraint.

Investors will likely watch Broadcom’s next reporting cycle for more clarity on margin trajectory, any further changes to the AI revenue outlook, and evidence that software growth and services can benefit from the same AI infrastructure wave that is driving chip demand. In particular, follow-through on the company’s fiscal 2027 AI revenue expectation may become a focal point after a guidance and margin mix update failed to satisfy some of the market’s highest expectations.