r/investing
I went through the AVGO transcript line by line. Here's what I actually found.
Author argues AVGO's post-earnings drop is overblown, citing strong AI demand to 2028, and highlights bullish trends for MRVL and MU.
- AI networking and custom silicon demand is insatiable with order visibility extending to 2028.
- AI infrastructure buildout requires exponential growth in compute, HBM, and switching fabric, creating a non-linear demand curve.
- Semiconductor companies are successfully locking in long-term contracts with fixed pricing due to supply constraints.
AVGO dropped 15% this week on an earnings "miss." I want to walk through what the transcript actually says because the market reaction and the business reality are completely disconnected.
Hock Tan confirmed orders are visible to 2028 right now. Not 2026. Not 2027. 2028. A 1 gigawatt XPU plus networking order has already been received. OpenAI goes into production on custom silicon late 2026. META's custom AI program ramps H2 2027. Management said on the call: "demand for networking is simply insatiable."
The stock dropped because the $100B FY2027 AI revenue guide wasn't raised. That's it. The business beat on every metric. Revenue up 48% YoY. AI semiconductor revenue up 143% YoY. Operating margin hit 67%.
A few things I'm watching that nobody's talking about:
Google multi-sources its silicon. They don't sole-source to avoid getting bottlenecked. Mediatek is the primary beneficiary on that program, possibly MRVL. This means the AI networking TAM doesn't consolidate to one winner. AVGO wins, MRVL wins, Mediatek wins. The pie grows faster than any single company can eat it.
Jensen Huang said this week: "the connectivity side, the AI networking side of the business has very rich margins." He called MRVL a potential trillion dollar company around networking and interconnects. That's not hype, that's the CEO of NVDA describing the supply chain he depends on.
The Anthropic RSI report dropped this week too. Claude is now authoring over 80% of Anthropic's own codebase. Task length autonomy has been doubling every four months. They're guiding toward weeks-long autonomous tasks by 2027. Every benchmark improvement means more compute, more HBM, more switching fabric, more storage. The demand curve isn't linear.
MU is on a similar trajectory. They're moving tier 1 clients to multi-year contracts with fixed pricing and volume commitments at a moment when they can only supply 50 to 66% of demand. Bears read that as a peak-cycle tell. I read it as a company locking in customers who are terrified of being supply-constrained during the most critical infrastructure buildout in a generation. June 24 earnings are the real signal.
The market isn’t pricing reality anymore. It’s pricing perfection.
Yeah and this guy has to write a whole thing because he’s mad chip stocks sold off.
Markets are allowed to go down, especially when they’re an overheated mess.
It's an AI generated post man, no point even responding to it
Based on what? Everyone accuses people of AI posts now, just because.
Look, if these AI-related stocks are going to do 100% every year for the next year or two, everyone can hedge these corrections with a small put position. Win going up, and win going down.
Hedging a 1 lot of smh is like 7k with IV over 100. It’s not really ideal to buy protection when that protection is at all time highs.
Man I'm getting real tired of these AI generated posts. Stop talking like you're trying to get us hyped for your own post. You don't need to say " here's what I actually found" - just say the thing you found summarized in the header.
And tell your AI to stop using phrases like "here is what nobody is talking about". If nobody is talking about it, your AI wouldn't have picked it up anyway.
Are the mods planning to do anything about these low effort AI slop posts?
I agree. My eyes roll so far into the back of my head when I read things like:
“That's not hype, that's the CEO of NVDA describing the supply chain he depends on.“
Seriously. At LEAST clean it up, pay for a pro model, or do anything at all to make me feel like the internet still has a few human beings on it.
$100 billion AI revenue in 2027 means $154-$166 billion total revenue. And even if that grows modestly from there into 2028, it is going to be huge. And when Hock says he has clear visibility, he means it. He is not a pump and dump guy.
Also, Broadcom is generations ahead in the connectivity game. Companies like Arista, who are also going to gain big in these AI buildouts purely rely on Broadcom chips. Even Cisco uses a lot of Broadcom chips.
There is a reason why Hock did not increase the guidance. His earlier guidance was based on everything he has already "secured" including HBMs. How can he unilaterally raise the guidance when raw materials are not available? It is not that tough to understand. That is why he used the term "insatiable".
People should not Mock the Hock, he is a shrewd operator and knows what he's doing. Going to retire my bloodline with AVGO
Everything about this post screams AI.
Broadcom ran up almost 40% in the quarter prior to earnings. Some of that was the market pricing in the earnings beat which happened, and some of it was the market gambling on how big the beat would be. The speculators overestimated how well they'd actually do, hence the drop when they failed to meet the 'whisper numbers'.
They weren't unfairly punished by an overreacting market, they were given an unfairly high price prior to earnings. It's the same thing that happens regularly with Nvidia - they set easy targets, them achieving those targets gets priced in months before earnings, and then they drop because the more optimistic analysts priced in an even bigger beat in the weeks leading up to the call as a speculative premium into the stock price.
It's also not 'profit taking', because earnings are binary events with significant downside risk. Anyone serious about locking in gains does it before the call, especially when they know that the speculators buying options will provide them with exit liquidity.