Broadcom Inc. (AVGO.US) faces financial report test after a 64% surge: AI feast is not over yet, but the market is starting to worry about the peak.

Broadcom Inc.'s stock price recently surged, with its market value increasing by over $280 billion in just the past four trading days. However, as the financial report is set to be released after the market closes, investors may evaluate whether this surge has gone too far. Stock price soaring before financial report, market worried about profit-taking trend "It's difficult to determine whether we are overreacting at this point, but the possibility of profit-taking definitely exists," said Tim Ghriskey, Senior Portfolio Strategist at Ingalls & Snyder, which manages around $11 billion in assets and holds Broadcom Inc. stocks. "This doesn't mean there's anything wrong with the company, but we have seen a huge surge, and people will want to lock in profits, especially if they are concerned about a similar sell-off trend as earlier in the year. The volatility is very high right now." Broadcom Inc.'s stock is recovering from a weakness a few months ago, dropping 23% from December last year to the end of March this year, reaching a low point in 2026 on March 30th. It has since surged by 64%, becoming the third largest contributor to the S&P 500 Index's 20% rise, following NVIDIA Corporation (NVDA.US) and Apple Inc. (AAPL.US). These gains are part of a historic rebound in semiconductor stocks, benefiting from a surge in chip spending in the artificial intelligence field. The Philadelphia Semiconductor Index rose by 94% in 2026, on track for its best annual performance since 1999. Companies like Amazon.com, Inc. (AMZN.US), Meta (META.US), Alphabet (GOOGL.US), and Microsoft Corporation (MSFT.US) are expected to spend up to $725 billion in capital expenditures this year alone. However, some Wall Street professionals are starting to question whether all these spending commitments will ultimately results. On Tuesday, Alphabet's stock price declined after the company announced a rare move to raise $80 billion in funds through a series of equity issuances, one of the largest equity deals in history. The company also happens to be one of Broadcom Inc.'s largest customers, accounting for nearly 13% of its revenue. "This confirms that they won't stop spending soon," Ghriskey said. "Can they afford more? Both spending capacity and company growth rate are limited." As capital expenditure growth is key to Broadcom Inc.'s continued rise, some investors are starting to worry about the scale of these investments. Chipmakers have historically been cyclical, meaning they often go through cycles of boom and bust. That's why, despite this AI cycle being bigger and longer than before, speculation in the professional investment community about a potential downturn in the market is still rampant. "I am convinced the AI transformation is coming," said Elliott Parker, CEO of venture capital firm Alloy Partners. "But there is also a scenario where the transformation doesn't happen as quickly as people expect, and chip customers don't strike gold, and that's when we'll start to see the rebound waver." Wall Street analysts expect Broadcom Inc.'s revenue to increase by over 47% in the second quarter ending on April 30th, higher than the 20% in the same period last year. Profit is expected to grow by 67%. And they are becoming more and more optimistic, with their earnings per share expectations for the company's 2026 fiscal year raised by 11% in the past three months and up 33% for the 2027 fiscal year. The options market is anticipating stock price volatility, with trader pricing showing a possible 7.8% two-way swing in Broadcom Inc.'s stock price after the financial report, higher than its average volatility of 5.3%. This year, the strategy of shorting AI winners' earnings reports has not been effective. Chip stocks such as Intel Corporation (INTC.US), Micron Technology, Inc. (MU.US), Advanced Micro Devices, Inc. (AMD.US), and Texas Instruments Incorporated (TXN.US) have all taken off after confirming their rapid growth in company performance. Dell Technologies, Inc. Class C Tech (DELL.US) and HP Inc. (HPQ.US), which manufacture computer equipment for AI data centers, also surged after releasing their financial reports. Valuations may have overpriced the future, with little room left for further gains The unique aspect of Broadcom Inc.'s case is that it appears to be nearing a peak in its recent growth. The company is expected to see a 62% revenue growth in its 2026 fiscal year ending in October, but then the growth rate is predicted to slow down to 58% in 2027 and drop to 24% in 2028. Net profit also shows a similar trend. "The market still expects things to be better than the current guidance," said Eric Gerster, Chief Investment Officer at AlphaCore Wealth Advisory. The stock is not cheap, with a forward 12-month price-to-earnings ratio of 32 times, much higher than its 10-year average of 18 times. In comparison, the forward P/E ratio for the semiconductor index is 28 times, and NVIDIA Corporation's P/E ratio is 22 times. Broadcom Inc. remains popular on Wall Street, with out of 59 analysts covering the stock, 56 recommend buying, and none recommend selling. However, analysts' average target price for the next 12 months is $480.56, and the stock's closing price on Tuesday was $481.57, indicating little room for further gains. All of this summarizes the current market position of the stock. Whether it is considered a good bet or a bad bet in the long run, the question for investors at this moment is: After such a crazy surge, does it have enough fuel in the tank to continue moving forward? "I don't know what they can say to make this story any better," said Luke Rahbari, Portfolio Manager at Rational Equity Armor Fund, who holds Broadcom Inc. stocks. "I'm thinking whether Broadcom Inc. will be one of the first chipmakers to have their potential realized, revenue guidance meets expectations, they are firing on all cylinders, there are no more engines to fire." Of course, Broadcom Inc. is also actively taking measures to strengthen customer relationships and form mutual interests. According to reports at the end of last month, Apollo Global Management Inc. and Blackstone Inc. jointly raised about $36 billion in debt financing for Anthropic to support its large-scale purchase of Alphabet Inc. Class C's TPU chips, which will be leased and used by Anthropic. Broadcom Inc., which assists Alphabet Inc. Class C in chip development, will provide guarantees for most of the funds in this transaction. The deal is expected to be one of the largest private credit transactions ever and the largest chip financing debt transaction to date. Broadcom Inc.'s move is an important step in actively taking on industry chain risks, and building closer financial relationships with the current dominant "big three" models may open up Broadcom Inc.'s imagination space.