💼 Broadcom: The Illusion of a 34x PER and Cracks in the Custom Chip Market - 2026.06.18

Hey there, Peanut from Bultagi.com here 🥜.

The market mood has been quite hot lately. As of June 18, Broadcom closed at $411, up 4.78%, with a trading volume of roughly 24.95 million shares. Places like JPMorgan have been calling the recent correction a buying opportunity and suggesting an aggressive approach ^[3]. But as always, we need to look at the numbers coldly.

💼 A 34x PER: Is it Really Cheap?

First off, Q2 revenue hit $22.2 billion, and operating expenses (Opex) were held flat. Management guided for 84% revenue growth next quarter, and while AI chip bookings exceeded $30 billion last quarter, actual shipments were around $10.8 billion. They seem very confident in demand stretching all the way to 2028.

Currently, the stock carries a hefty premium, trading at about 34x this year's expected earnings. However, optimists argue that if you pull forward the expected earnings for three years out (2028), today's price (based on the $392 level) is only 15.1x future earnings. If the multiple settles around 24.6x, the math suggests you could expect quite a high return.

Is that really true? Is it verifiable? In past market shocks, Broadcom shares have fallen as much as 47% from peak to trough. If that 2028 growth isn't entirely guaranteed, the current high multiple runs the risk of acting as a value trap.

📉 $3 Billion Debt Tender and Capital Efficiency

Financial maneuvers are also worth noting. Broadcom announced it is upsizing its cash tender offer for senior notes from the initially planned $2.5 billion to $3.0 billion ^[1]. The targets are notes maturing between 2030 and 2038 ^[1]. Approximately $5.5 billion in notes were already tendered, and they decided to accept $2.9 billion of that ^[1]. This reads as a classic capital efficiency move to improve the debt structure and reduce interest expenses.

⚠️ Cracks in the Custom Chip Monopoly? The Bearish Scenario

The area we need to be most wary of is the potential weakening of their moat. A startup called 'Architect Labs' just raised $24 million in seed funding to challenge the custom AI chip market currently dominated by Broadcom and Marvell ^[2].

Right now, designing a custom chip usually takes about two years and costs hundreds of millions of dollars, but they claim they can use AI to make this process cheaper and faster ^[2]. What's interesting is that Google DeepMind's Jeff Dean, along with former executives from OpenAI and Nvidia, invested in this ^[2]. This leaves room to interpret that Big Tech companies are fostering alternatives to reduce their reliance on Broadcom.

From a short-to-medium swing perspective, even amidst the flashy guidance and target price upgrade rally, Peanut views the current valuation as fully pricing in perfect future growth, meaning caution is needed as it is a candidate for profit-taking trims. If growth is delayed even slightly or if alternatives rise, that 34x PER could become a heavy burden at any moment.

📰 Reference News (3)

1

Broadcom Inc. Announces Results and Upsize of Offers to Purchase for Cash Certain of its Outstanding Debt Securities - Yahoo Finance

Yahoo Finance · 2026.06.18

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2

Architect Labs raises $24 million to take on Broadcom, Marvell custom chip business - Yahoo Finance

Yahoo Finance · 2026.06.18

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3

JPMorgan: "Broadcom's Correction is a Buying Opportunity... Load Up Aggressively" - Yonhap Infomax

연합인포맥스 · 2026.06.17

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