This Analyst Just Downgraded Broadcom Stock. Here's Why.

Broadcom (AVGO) shares opened meaningfully lower on Friday after a senior Rothschild analyst issued a dovish note on the custom artificial intelligence (AI) chips specialist. Mike Harrison downgraded AVGO this morning to “Neutral” and lowered his price target significantly to $398, indicating potential upside of less than 10% from its previous close. 

The bearish call comes as Broadcom stock struggles to regain momentum, currently down about 30% from its year-to-date high. 

What Made Rothschild Downgrade Broadcom Stock

Rothschild’s downgrade centers on the financial strength of Broadcom’s artificial intelligence partners and the competitive threats that could make it challenging for the company to deliver on its projected earnings.

In particular, Harrison cited Anthropic (ANT) and OpenAI’s aggressive reliance on credit markets. Up to 15 gigawatts of computing capacity for those two clients supports AVGO’s outlook for AI revenue of a whopping $230 billion in fiscal 2028. The concern is whether these AI research labs can generate enough cash to sustain their expansion, he told clients. 

For AVGO shares, the implication is that financing deserves close attention alongside chip orders: ambitious demand projections offer less reassurance when customers still need substantial outside funding to turn those plans into deployments. 

What Else Could Weigh on AVGO Shares

According to Harrison, declining inference costs could make it difficult for Anthropic and OpenAI to maintain their dominance over open-source models. While Broadcom’s custom AI chips offer a cost advantage, rising competition will likely weigh on inference gross margins. 

For example, Alphabet’s (GOOG) (GOOGL) commitment to its own tooling and diversifying away from Broadcom raises questions about the long-term durability of its custom chip business model. If Google's non-Broadcom training chips succeed, other frontier labs may eventually follow suit, as the analyst concluded in his bearish note on Broadcom. 

Wall Street’s Consensus View on Broadcom

Other Wall Street analysts do not seem to agree with Harrison’s bearish stance on AVGO stock, though. According to Barchart, the consensus rating on Broadcom remains at “Strong Buy,” with the mean price target of about $525 indicating massive upside potential heading into 2027. 

On the date of publication, Wajeeh Khan did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.