Broadcom stock has remained under pressure in the past few months, even as the artificial intelligence (AI) boom has accelerated. It has slumped from a record high of $492 to the current $354, with its market capitalization falling from $2.29 trillion to the current $1.69 trillion. Technicals suggest that the stock may drop further in the near term.
Broadcom shares have fallen despite strong growth
AVGO stock has dipped since June, even as the company continued doing well amid the ongoing artificial intelligence (AI) boom. This boom has helped it make some big announcements with some of the top players in the sector.
It reached a 10 GW deal with OpenAI worth about $300 billion. This deal will see it create the new Jalapeno chips that will compete with those made by companies like Nvidia and AMD.
Broadcom also reached a deal with Google for work on its TPU chips. This partnership is expected to run through 2031. Additionally, it has major partnerships with companies like Anthropic and Meta Platforms.
Broadcom also inked a deal with Apollo and Blackstone targeting about 20 GW of deployments through 2028. It also expanded its business with Apple. In July, it expanded this partnership to 2031 in a deal worth $30 billion.
These partnerships have made it one of the fastest-growing companies in the industry. Its semiconductor AI revenue jumped by 143% in the second quarter to $10.8 billion. As a result, the consolidated revenue jumped by 48% to $22.2 billion, with its adjusted EBITDA reaching $15.2 billion.
Analysts expect that Broadcom’s business will continue growing. The average estimate is that its quarterly revenue jumped by 93.6% to $34.9 billion, with its annual revenue expected to hit $105.96 billion. This revenue will then hit $173 billion next year.
Analysts are also optimistic about its stock’s performance. Piper Sandler’s David O’Connor upgraded the stock’s target to $460, while Citic Securities hiked from $450 to $525. Citigroup’s Atif Malic hiked the target from $500 to $515, while BNP Paribas increased from $675 to $715.
A key challenge is that it is highly overvalued, with the forward price-to-earnings ratio sitting at 31, much higher than the sector median of 23.
Broadcom stock technical analysis points to more downside
AVGO stock chart | Source: TradingView
The daily chart shows that the AVGO stock price has been in a strong sell-off in the past few months. This sell-off moved from a high of $492 in June to the current $354.
A closer look shows that the stock is about to form a death cross as its 50-day and 200-day Simple Moving Averages (SMA) are nearing a crossover. This pattern often leads to further downside over time.
The stock has dropped below the Supertrend indicator, while the Relative Strength Index (RSI) has moved below the neutral level of 50. It has also formed a horizontal channel, which is part of a bearish flag pattern.
Therefore, the stock will likely have a bearish breakout, with the next target to watch being the psychological level of $300. This view will be confirmed if it moves below the key support level of $336, its lowest level in September.
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