Broadcom and OpenAI Just Unveiled the New Jalapeño AI Chip. What That Means for AVGO Stock.

Semiconductor giant Broadcom (AVGO) grabbed the spotlight on June 24 after joining forces with OpenAI to unveil Jalapeño, OpenAI's first custom-built artificial intelligence (AI) chip, designed to power the next generation of AI models. The chip is the first AI accelerator in a multi-generation computing platform that the two companies are developing together to make AI faster, more reliable, and more affordable to deploy at scale.

OpenAI designed Jalapeño based on its deep understanding of the ways in which AI models like ChatGPT work, while Broadcom and Celestica (CLS) helped transform the design into a production-ready chip. Their work included chip manufacturing, system integration, high-speed networking, and building the infrastructure needed to produce the chips at scale. Jalapeño is designed to support both current and future AI models, and engineering samples are already running machine-learning workloads, including GPT-5.3-Codex-Spark, at the chip's target speed and power levels.

Although OpenAI is still completing final performance tests, early results suggest Jalapeño delivers significantly better performance while using less power than today's leading AI chips. The chip is also designed to move data more efficiently, allowing AI models to process information faster while reducing energy consumption. Broadcom's chip design expertise and its Tomahawk networking technology are expected to play a key role in bringing the platform into large-scale production.

For Broadcom, this is more than just another product launch. The partnership strengthens the company's position as one of the key suppliers powering the global AI boom and expands its role beyond networking chips into custom AI processors. If OpenAI increasingly relies on Broadcom's technology as its AI business grows, the partnership could become a meaningful long-term growth driver for AVGO. Thus, given this latest development, here’s a closer look at AVGO stock. 

About Broadcom Stock

San Jose-based Broadcom has grown into one of the world's most influential semiconductor companies, powering much of the technology that runs the digital economy. While it may not enjoy the same consumer recognition as many Big Tech giants, Broadcom supplies the chips and infrastructure software that keep data centers, broadband networks, enterprise systems, and cloud platforms running efficiently. Its business combines a broad portfolio of semiconductor products focused on connectivity and data processing with a fast-growing infrastructure software segment built through strategic acquisitions.

This diversified business has placed Broadcom at the heart of some of the biggest technology trends, particularly AI and cloud computing. In 2026, the company's growth has been driven by soaring demand for custom AI chips and the high-speed networking technology needed to connect the massive computing clusters that train and run advanced AI models. As AI adoption accelerates worldwide, Broadcom's critical role in the ecosystem has made AVGO one of the most closely watched semiconductor stocks on Wall Street.

Broadcom has been one of the biggest beneficiaries of the AI boom, delivering outstanding gains over the recent years. In the past two years, AVGO has surged a massive 133.25%, driven by soaring demand for AI infrastructure and the company's expanding presence in the semiconductor market. The stock's momentum has moderated in 2026, however, as intensifying competition in AI, broader technology sector headwinds, and lofty investor expectations have prompted bouts of volatility. 

Even so, Broadcom continues to outpace the broader market and now commands a market capitalization of approximately $1.80 trillion. While AVGO has retreated 24.8% from its all-time high of $495, reached recently on June 3, the stock remains up a robust 37.44% over the past year and 7.29% year-to-date (YTD). In comparison, the S&P 500 Index ($SPX) has returned 19.9% over the past 12 months and 7.6% so far in 2026, underscoring Broadcom's resilience despite its recent pullback.

Broadcom Shares Slide Even After Beating Q2 Earnings Estimates

Broadcom reinforced its position as one of the biggest beneficiaries of the AI boom when it reported fiscal second-quarter 2026 results on June 3. Strong demand for its custom AI application-specific integrated circuits (ASICs) and high-performance networking products helped the chipmaker deliver another quarter of record-breaking growth. Net revenue climbed 48% year-over-year (YOY) to a record $22.19 billion, up from $15 billion in the year-ago quarter and ahead of Wall Street's consensus estimate of $22.04 billion.

The company's AI semiconductor business once again stole the show. AI-related semiconductor revenue surged 143% YOY to a record $10.8 billion, slightly exceeding management's own expectations. The impressive growth highlights the rapid pace in which hyperscale cloud providers are deploying custom AI chips, with AI products now contributing nearly 49% of Broadcom's total revenue.

The strong top-line performance also translated into robust profitability. Broadcom reported non-GAAP earnings of $2.44 per share, up 54% from the prior year and above analysts' expectations of $2.40 per share. Plus, the company continued to generate substantial cash, with adjusted EBITDA reaching a record $15.24 billion, an increase of 52% YOY and representing an impressive 69% of total revenue. Meanwhile, free cash flow jumped 60% to $10.26 billion, underscoring the strength and efficiency of Broadcom's business model.

Management's outlook was equally encouraging. For the fiscal third quarter of 2026, Broadcom expects revenue of approximately $29.4 billion, representing 84% YOY growth. Even more striking, the company forecast AI semiconductor revenue of $16 billion. If achieved, that would represent annual growth of more than 200% compared with the $5.2 billion generated in the third quarter of the previous fiscal year, reinforcing expectations that demand for custom AI chips continues to accelerate at a remarkable pace.

Despite posting blockbuster results and issuing strong guidance, Broadcom's shares fell almost 12.6% in the trading session following the earnings release. The sell-off appeared to reflect the high expectations of investors. Rather than raising its long-term outlook, management chose to reaffirm its existing guidance, leaving some investors hoping for even more.

Investors also paid close attention to the company's business mix. Broadcom's Infrastructure Software division, led by the VMware acquisition, generated $7.18 billion in revenue, up a healthy 9% YOY. However, that growth paled in comparison to the 79% YOY increase posted by the Semiconductor Solutions segment, fueling concerns that parts of Broadcom's business outside AI are growing at a much slower pace than its booming semiconductor franchise.

How Are Analysts Viewing Broadcom Stock?

Despite recent volatility, Wall Street's conviction in Broadcom remains firmly intact. AVGO enjoys a consensus "Strong Buy" rating, with 34 out of 42 analysts issuing "Strong Buy" recommendations, three assigning "Moderate Buy," and only five opting for "Hold." The bullish outlook extends to price targets as well. Analysts' average target of $516.59 points to a 38.9% upside, while the most optimistic forecast of $640 implies the stock could surge 72%, underscoring expectations that Broadcom's AI leadership can continue driving shareholder returns.