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Stock Markets March 3, 2026

HSBC Says Recent Pullback Creates Opportunity in Broadcom; Keeps Buy Rating

Analyst trims price target but argues AI-driven demand and custom chips underpin upside for semiconductor leader

By Sofia Navarro AVGO
HSBC Says Recent Pullback Creates Opportunity in Broadcom; Keeps Buy Rating
AVGO

HSBC has reaffirmed its Buy rating on Broadcom while reducing its price target to $450 from $535, citing a valuation reset among AI-focused chip names as a buying opportunity. Analyst Frank Lee forecasts a slight beat to guidance for Broadcom's upcoming 1QFY26 results and projects stronger AI-driven growth later in the fiscal year, driven by ASIC ramps and AI networking demand.

Key Points

  • HSBC retains a Buy rating on Broadcom while lowering its price target to $450 from $535, citing an estimated 41% upside.
  • The bank forecasts a slight beat to guidance for 1QFY26 revenue ($19.5 billion vs management's $19.1 billion) and expects $21 billion for the second quarter, about 3% above consensus.
  • HSBC highlights Broadcom's custom ASIC ramp and a $20 billion backlog in AI networking as primary drivers, revising AI networking revenue estimates to $17 billion (FY26) and $30 billion (FY27), well above Street estimates.

HSBC is urging investors to consider Broadcom as a buying opportunity after a pullback in AI-related chip stocks. The bank is keeping its Buy recommendation on the company while lowering its target price to $450 from $535, a move that still leaves roughly "41% upside from current levels," according to analyst Frank Lee.

Lee expects Broadcom to report first-quarter fiscal 2026 revenue modestly above management guidance, forecasting $19.5 billion compared with the company's own $19.1 billion estimate. Looking ahead to the second quarter, HSBC projects $21 billion in revenue - about 3% higher than consensus.

While HSBC describes AI-driven momentum as remaining "firm," the bank notes that a "more dramatic growth trajectory" is likely to materialize in the second half of FY26. A central element of HSBC's bullish case is Broadcom's custom chip business. The bank says "consensus FY26e ASIC forecasts [are] catching up with our estimates," after the Street raised its projections by 25% following Broadcom's most recent quarterly update.

HSBC maintains ASIC forecasts for FY26 and FY27 that exceed consensus by 13% and 12%, respectively. The firm also points to AI networking as a significant potential catalyst. Management disclosed a $20 billion backlog, and HSBC has increased its AI networking revenue estimates for FY26 and FY27 to $17 billion and $30 billion, figures the bank says are "43%/64% above the Street."

In HSBC's most bullish scenario, the stronger ASIC ramp and upside to AI networking revenue could produce "further upside of 16%/17% to EPS." Lee concluded that the combination of faster ASIC production and higher-than-expected AI networking sales could help Broadcom "re-rate towards our target PE."

How HSBC's view breaks down

  • Rating: Buy (maintained)
  • Target price: cut to $450 from $535
  • Estimated upside: approximately 41% from current levels
  • HSBC revenue expectations: 1QFY26 at $19.5 billion (vs management $19.1 billion); Q2 at $21 billion (about 3% above consensus)
  • ASIC forecasts: HSBC's FY26/FY27 estimates remain 13%/12% above consensus
  • AI networking revenue estimates: $17 billion (FY26) and $30 billion (FY27), 43%/64% above Street

Risks

  • Valuation reset across AI-related chip names has created recent weakness - market volatility in semiconductors and AI stocks could persist and affect sentiment.
  • Differences between HSBC's forecasts and consensus create uncertainty - Street estimates have shifted (rising 25% for ASICs after Broadcom's update), and consensus may continue to change.
  • Timing of material growth is uncertain - HSBC expects a more pronounced acceleration in the second half of FY26, indicating near-term results may not reflect the full anticipated upside.

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