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