This is part 2 of the case for Broadcom.
If you have not already read part 1, do check it out here.
Sentiment for Broadcom has been weakening since its recent earnings report.
Concerns about increasing competition and a lack of upside to guidance has resulted in a rerating in the stock.
Furthermore, the risk-on sentiment has favored what the market deems as market share gainers rather than market leaders.
Broadcom’s 5-year average forward price-to-earnings ratio is 24x, which is where the current forward price-to-earnings ratio is at.
That said, the 3-year average (2023 to 2026) is more relevant here given Broadcom rerated only after the market started to see the value in its involvement in TPUs and custom silicon, and the 3-year average forward price-to-earnings ratio is 30x.
At the peak, Broadcom traded at 48x forward price-to-earnings ratio and today’s 24x forward price-to-earnings ratio is also the trough forward price-to-earnings ratio we saw in March 2025 and March 2026.
This tells me that the stock sentiment has soured and valuation is reasonable given it is trading near recent trough valuations.
Today, in this article, I will dive into the opportunity for Broadcom and determine whether the market is pricing in too little with this market leader.
Here’s what we focus on in the article:
AI increasingly important, especially custom AI accelerators
Custom AI accelerator deep dive
AI networking deep dive
Google and Broadcom
MediaTek vs Broadcom
Expert call 1: Marvell VP of Procurement for IT Infrastructure
Expert call 2: Former lead engineer at MediaTek (direct involvement in custom chip development and partnership with hyperscalers)
Expert call 3: Former MediaTek staff analog design engineer (Focused on high-speed interconnects for AI chip integration, particularly for hyperscaler customers)
Optics optionality
Financials
Valuation
Investment conclusion
Google and Broadcom
Broadcom has one customer contributing 32%, 28%, and 21% of its FY2025, FY2024, and FY2023 revenue.
This customer is likely Google given the size of the TPU program.
In April 2026, Broadcom and Google entered into a long-term agreement for Broadcom to develop and supply Google’s future generations of TPUs and the two parties also signed a Supply Assurance Agreement for Broadcom to supply networking and other components to be used in Google’s future generations of AI racks up to 2031.
In the recent June 2026 earnings call, Broadcom CEO stated its relationship with Google continues to be strategic and very substantial, and he expects its business with Google to continue to grow in the foreseeable future.
Broadcom acknowledged that at some point Google would need diversity of sources, but hints that Broadcom remains a key partner to Google for TPUs.