Third Point Starts to Raise Alarm Bells on Broadcom After Dumping AVGO Stock in Q2

Broadcom (AVGO) is a global technology leader headquartered in Palo Alto, California, that designs, develops, and supplies a broad portfolio of semiconductor and infrastructure software solutions. The company has emerged as a critical enabler of the AI computing boom through its custom AI accelerators (XPUs), high-speed networking chips, and broadband and enterprise semiconductor products, with hyperscale customers including Google (GOOG) (GOOGL), OpenAI, and Anthropic. Beyond semiconductors, Broadcom's infrastructure software segment, anchored by VMware Cloud Foundation, has become a major growth driver following its 2023 acquisition of VMware.

Broadcom Stock Performance

Broadcom's stock has delivered a strong 2026, climbing roughly 26% over the past year and recently trading around $380, though well off its 52-week high of $495 set earlier this year. Shares have pulled back nearly 12% in recent sessions as investors booked profits and repositioned ahead of Broadcom's fiscal third-quarter earnings report on Sept. 2, even as the stock remains far above its 52-week low of $281.87. Institutional buying remains robust, with major funds adding to positions amid continued optimism around Broadcom's expanding AI semiconductor backlog and custom accelerator roadmap.

By comparison, the S&P 500 Information Technology Sector Index ($SRIT) has climbed roughly 21% year-to-date (YTD) in 2026, itself a strong showing amid the AI-driven rally. AVGO stock has meaningfully outperformed its own sector over the trailing year, reflecting investor enthusiasm for its dominant position in custom AI chips and cloud infrastructure software.

Broadcom's Strong Results

Broadcom posted record fiscal second-quarter 2026 revenue of $22.1 billion, up 48% year-over-year (YoY), driven by explosive AI semiconductor demand. Non-GAAP diluted EPS came in at $2.44, up sharply from $1.58 a year earlier and ahead of analyst expectations, marking Broadcom's third earnings beat in four quarters as AI infrastructure spending continued to accelerate across hyperscale customers.

AI semiconductor revenue surged 143% YoY to $10.8 billion, outpacing the company's own forecast, while adjusted EBITDA jumped 52% to a record $15.2 billion, representing 69% of total revenue. GAAP net income nearly doubled to $9.31 billion, and free cash flow reached $10.3 billion, or 46% of revenue. Cash and cash equivalents swelled to $19.6 billion, reinforcing Broadcom's balance sheet strength even as it continued its quarterly dividend of $0.65 per share.

Management guided fiscal third-quarter revenue to approximately $29.4 billion, an 84% YoY jump, with AI semiconductor revenue alone expected to grow more than 200% to $16 billion. CFO Kirsten Spears highlighted strong operating leverage, projecting non-GAAP operating margin to hold steady near 67%. Broadcom reiterated its full-year 2026 AI semiconductor revenue outlook of roughly $56 billion and reaffirmed its 2027 AI revenue guidance exceeding $100 billion, underscoring management's confidence in sustained hyperscaler demand.

Third Point Exits Broadcom

Dan Loeb's Third Point disclosed a notable exit from Broadcom during the second quarter, unloading its full 50,000-share stake in the AI chipmaker as part of a broader portfolio shakeup. The move comes even as Broadcom continues riding the AI semiconductor boom, with its custom accelerator business posting triple-digit growth and hyperscale demand from customers like Google, OpenAI, and Anthropic remaining robust.

Third Point's Broadcom exit was accompanied by similar semiconductor-sector trims, including reduced positions in KLA (KLAC) and Lam Research (LRCX), as well as a full exit from Nvidia (NVDA), suggesting a broader rotation away from pure-play chip stocks. In their place, Third Point added fresh capital to names like Applied Digital (APLD), Core Scientific (CORZ), and Wolfspeed (WOLF), while notably initiating a new position in SpaceX (SPCX).

The Broadcom exit stands out given the stock's strong 2026 performance, raising questions about whether Third Point is booking profits or growing cautious on AI semiconductor valuations heading into Broadcom's Sept. 2 earnings report.

Is AVGO Stock a Buy Despite Third Point's Exit?

Third Point's decision to exit its AVGO stake may raise eyebrows, but the broader Wall Street picture tells a far more bullish story. AVGO stock carries a consensus "Strong Buy" rating from 41 analysts, with 32 "Strong Buy" and three "Moderate Buy" calls dwarfing just six "Hold" ratings. The average price target of $519.35 implies a striking 43% upside from current levels, suggesting most institutions remain far more optimistic than Loeb's fund. With AI semiconductor demand still accelerating heading into September earnings, Broadcom's long-term growth story appears intact despite one hedge fund's profit-taking.