Buy the dip in this AI chipkamer, HSBC says

Investing.com -- HSBC is urging investors to take advantage of the recent pullback in one large chip stock, arguing that a valuation reset across AI names has created an opportunity for what it sees as another strong year for the semiconductor group.

Analyst Frank Lee wrote that HSBC is maintaining its Buy rating on Broadcom while trimming its target price to $450 from $535, saying the bank still sees around “41% upside from current levels.”

HSBC expects Broadcom’s upcoming 1QFY26 results to land slightly ahead of guidance, forecasting $19.5 billion in revenue versus management’s $19.1 billion estimate.

For the second quarter, Lee expects $21 billion in revenue, 3% above consensus, adding that while AI-driven momentum remains firm, “a more dramatic growth trajectory” will come in the second half of FY26.

A key pillar of HSBC’s view is Broadcom’s custom chip business. The bank said “consensus FY26e ASIC forecasts [are] catching up with our estimates,” after the Street raised its projections by 25% following Broadcom’s last quarterly update.

HSBC’s own FY26 and FY27 ASIC forecasts remain 13% and 12% above consensus, respectively.

The bank also sees AI networking as the next major catalyst. The bank highlighted management’s disclosure of a $20 billion backlog and said it is now revising its FY26/FY27 AI networking revenue estimates to $17 billion and $30 billion, “43%/64% above the Street.”

In HSBC’s most bullish scenario, that could drive “further upside of 16%/17% to EPS.”

“We believe the strong ASIC ramp and upside to AI networking revenue can help Broadcom re-rate towards our target PE,” Lee concluded.

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