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We just covered Billionaire Dan Loeb Pivots to AI and Sells Old Economy Stocks: His Top 7 AI Picks. Broadcom Inc. (NASDAQ:AVGO) ranks #7 (see Billionaire Dan Loeb’s Top 5 AI Stock Picks).

Billionaire Dan Loeb’s Stake: 50,000 Shares Valued at Approximately $15.48 Million (NEW Position)

AVGO is down about 10% over the past month and bulls say now is the time to buy it.

Broadcom’s (NASDAQ:AVGO) stock got hammered after its recent earnings, despite a genuinely strong quarter — analysts say it’s because expectations had simply run too far ahead of reality. The stock had already gained over 60% in the months leading into the print, with the market pricing in not just strong results but an upgraded outlook. What it got instead was confirmation of the same targets already communicated last quarter, with no upward revision. This was despite AI revenue growing 143% year over year, AI bookings exceeding $30 billion against shipments of only $10.8 billion, and Q3 guidance pointing to AI revenue growth of over 200% year over year.

The bigger shock came when management guided gross margins down to 74% from 77% — a 310 basis point compression in a single quarter — as the revenue mix shifts toward lower-margin hardware. This stung particularly hard because Broadcom’s (NASDAQ:AVGO) CEO had explicitly told investors just last quarter that margins would hold firm.

Bears believe margin pressure will only grow as the ASIC business scales, and that Google — Broadcom’s (NASDAQ:AVGO) largest customer — has already begun diversifying its custom chip sourcing to MediaTek and Marvell, introducing competitive pricing pressure that could further erode margins over time.

Carillon Eagle Growth & Income Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q1 2026 investor letter:

“Broadcom Inc. (NASDAQ:AVGO) was weak for the quarter as higher inflation led investors to fear a slowdown in hyperscaler spending. This led to lower spending on custom silicon, the main reason for Broadcom’s strength over the last couple of years. We believe Broadcom still has some of the best tech in the space and will be one of the biggest winners from AI (Click Here to Read the Letter in Detail).”

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While we acknowledge the potential of AVGO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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