Broadcom Inc. (AVGO) shares were trading nearly flat on Wednesday as investors waited for the company's fiscal third-quarter 2026 earnings, due after the closing bell on Sept. 2. Wall Street expects the chipmaker to report adjusted earnings of $3.24 per share on revenue of $29.43 billion.
But beyond the numbers, there's a bigger story: BakerAvenue Wealth Management sees Broadcom as a leading play on the next phase of artificial intelligence spending. The firm expects demand to shift from training large models to running AI applications at scale, and that's where Broadcom's custom chips come in.
King Lip Sees Broadcom Winning In AI Inference
King Lip, chief strategist at BakerAvenue Wealth Management, named Broadcom his top pick for the next evolution in custom AI chips and AI inference. He noted that NVIDIA Corp. (NVDA) has performed particularly well in the model-training market, while Broadcom is positioned for large, repetitive AI workloads that increasingly characterize inference.
"NVIDIA has been great for training models, but for huge, repetitive type workloads, Broadcom is our top pick, uh, for the next evolution in custom AI chips and inference play," Lip said.
He added that Broadcom doesn't need NVIDIA to lose market share for its own AI opportunity to expand. The two companies can benefit from different parts of growing AI infrastructure demand.
AI Trade Shifts From Spending To Returns
Lip believes investors are becoming more demanding as the AI investment cycle matures. He described the shift as moving away from "show me the model" toward "show me the money." Investors are increasingly focused on returns from massive AI capital expenditures rather than rewarding companies simply for increasing spending.
Lip also highlighted the transition from AI training toward inference as another major theme. Inference involves deploying trained models across specific applications and repetitive workloads, an area where Broadcom's custom-chip exposure becomes increasingly relevant.
Software Winners Need Data And Critical Workflows
The AI investment opportunity isn't just about chips anymore. Lip said the easiest phase of the AI trade centered on buying semiconductor stocks, but now investors need to identify which software companies can turn AI infrastructure into revenue.
Software companies with proprietary data and mission-critical workflows have the strongest opportunity to benefit, according to Lip. Companies without meaningful competitive advantages face greater disruption as AI capabilities improve.
Revenue Quality And ROI Remain Risks
Lip also flagged several risks around the broader AI trade, including revenue quality, interest rates, return on investment, and growing competition. He called questions around AI revenue quality a "yellow flag" rather than a red flag, particularly as financing arrangements between technology suppliers and customers become more complicated.
"When suppliers start to help finance their customers, investors should pay attention," Lip said.
He acknowledged that underlying AI demand remains clearly real, but investors need to distinguish organic customer demand from revenue supported by financing or other stimulus. Higher interest rates could also pressure AI companies whose earnings lie further in the future, and investors increasingly want companies to demonstrate actual returns on AI capital spending.
Lip also pointed to emerging competitors like DeepSeek and Kimi, saying rising costs could encourage customers to seek lower-cost AI alternatives.
Despite those broader risks, Lip sees Broadcom as particularly well positioned as AI workloads move toward inference and demand expands for customized chips designed around specific, high-volume computing tasks.
Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price forecast of $507.91. Recent analyst moves include:
- RBC Capital: Sector Perform (Maintains Forecast to $400.00) (Aug. 26)
- BMO Capital: Initiated with Outperform (Forecast $455.00) (Aug. 21)
- Erste Group: Downgraded to Hold (July 7)
Top ETF Exposure
- iShares Semiconductor ETF (SOXX): 8.12% Weight
- iShares Expanded Tech Sector ETF (IGM): 8.49% Weight
- Invesco PHLX Semiconductor ETF (SOXQ): 9.94% Weight
Significance: Because AVGO carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.
Price Action
AVGO Stock Price Activity: Broadcom shares were down 0.10% at $369.30 at the time of publication on Wednesday, according to market data.
