Spicy Stocks: Why BNP Thinks Jalapeño Could Benefit Broadcom Stock

Jalapeños have a funny way of waking things up. A little heat, and suddenly an ordinary meal has a whole lot more kick. Something similar is happening in the AI chip market, where OpenAI’s custom inference chip, Jalapeño, has been adding plenty of spice lately.

The excitement is not just because OpenAI is stepping into the custom-chip game. In testing, Jalapeño has even outperformed Nvidia Corporation’s (NVDA) Blackwell in some scenarios, spotlighting what specialized AI chips could bring to the table. And it’s a sign that the AI hardware race could be getting a lot more interesting.

That is where Broadcom (AVGO) comes into the picture.

BNP Paribas sees Jalapeño as a positive for semiconductor and software powerhouse  Broadcom, particularly because the chip was developed through a partnership with the semiconductor giant. Analysts led by Karl Ackerman believe the development reinforces Broadcom’s strength in custom silicon and high-performance AI networking as hyperscalers increasingly look for chips tailored to specific workloads.

The bigger takeaway is that the artificial intelligence (AI) opportunity may be spreading well beyond GPUs and across the entire infrastructure stack, and Broadcom could be sitting in an interesting spot.

So, with AVGO stock recently losing some ground, could Jalapeño be the extra kick Broadcom needs to turn things around? Let’s take a closer look at why BNP remains bullish on Broadcom.

About Broadcom Stock

Based in San Jose, Broadcom has become a major force in the global semiconductor industry, even if its name is less familiar to everyday consumers. The company provides chips and infrastructure software that support data centers, cloud platforms, broadband networks, smartphones, and enterprise systems. Its semiconductor portfolio focuses heavily on connectivity, networking, and data processing, while its infrastructure software business adds another source of revenue and diversification.

Broadcom has emerged as a key beneficiary of the AI boom, with demand rising for its custom AI accelerators and high-speed networking solutions. These technologies help connect and power the large computing systems needed to train and run advanced AI models. With a market capitalization of $1.7 trillion, Broadcom is now among the world’s most valuable technology companies.

Broadcom has emerged as one of the biggest beneficiaries of the AI boom, and AVGO stock has rewarded investors handsomely over the past couple of years. Shares have surged 130% in the past two years, supported by strong demand for AI infrastructure and Broadcom’s growing role in the semiconductor industry.

That progress helped AVGO reach an all-time high of $495 in June. Since then, however, the stock has pulled back 25%, giving investors a very different picture from its recent peak. Still, the bigger trend remains positive, with shares up 23.7% over the past 52 weeks and 16.3% over the past six months. In 2026, gains have been more modest, with the stock up 7.4% year-to-date (YTD).

Growing competition in AI, broader pressure across technology stocks, and high investor expectations have made it harder for AVGO to maintain its earlier pace of gains.

The technical picture also suggests that investors have become more cautious. Trading volume has been weak, while the 14-day RSI is 43.89, bringing the stock close to oversold territory. The MACD is also flashing caution, with the MACD line below the signal line, and the histogram showing red bars.

At first glance, AVGO stock’s valuation might make investors pause. The stock is priced at 39.49 times forward GAAP earnings, above the sector average of 29.75 times, although still below its own historical median of 48.34 times. Its 15.95 times forward sales multiple also carries a premium to both sector peers (3.41 times) and its historical median (12.86 times).

Management’s bullish fiscal 2027 outlook, including more than $100 billion in AI revenue, gives the premium a stronger backdrop. Broadcom’s deep relationships with U.S. hyperscalers such as Meta Platforms (META) and Alphabet’s (GOOG) (GOOGL) Google contribute another layer to the story.

And there’s a steady income angle to consider. Broadcom has increased its dividend for 15 consecutive years, with annualized payouts of $2.60 per share and a modest 0.73% yield. Its 35.08% payout ratio also suggests the company has room to keep rewarding shareholders as earnings grow. So, Broadcom is not just growing but is also showing a consistent commitment to returning capital to investors while maintaining financial flexibility for the years ahead.

Why Jalapeño Could Take Broadcom Stock Higher

The Jalapeño story gets particularly interesting when we look beyond the chip itself and at who helped bring it to life. OpenAI developed its custom inference chip in partnership with Broadcom, giving Broadcom another potential win as AI companies increasingly turn to specialized silicon.

And there’s a reason investors are paying attention. OpenAI’s testing showed Jalapeño outperforming Nvidia’s Blackwell in certain scenarios, highlighting how custom chips can be designed to squeeze more performance and efficiency out of specific AI workloads. That matters because inference – the process of actually running AI models – continues to become more demanding as models get larger and users expect faster responses.

For Broadcom, this plays directly into one of its biggest strengths of custom silicon. As major AI players develop their own accelerators, such as Google’s TPU, Meta's MTIA accelerator, Microsoft's Maia accelerator, and now OpenAI's Jalapeño, Broadcom could benefit from the growing demand for chips tailored to individual workloads rather than a one-size-fits-all approach.

There is yet another piece to this puzzle. More specialized AI systems mean greater demands on networking and memory infrastructure, areas where Broadcom already has significant exposure.

So, Jalapeño could be about making the AI infrastructure pie bigger, and giving Broadcom another slice of it.

A Snapshot of Broadcom’s Q2 Numbers

While investors are focused on the potential heat in the Jalapeño-Broadcom connection, it is worth taking a step back and looking at Broadcom’s financials. Reported on June 3, the second-quarter numbers showed why the chipmaker has become one of the biggest beneficiaries of the AI boom. Strong demand for custom AI application-specific integrated circuits (ASICs) and high-performance networking products helped Broadcom deliver another record-breaking quarter, with revenue climbing 48% year-over-year (YOY) to a record $22.2 billion, ahead of Wall Street’s expectations.

Broadcom’s AI semiconductor revenue jumped a whopping 143% YOY to a record $10.8 billion, slightly beating management’s own forecast. AI products now account for nearly 49% of total revenue, showing just how quickly hyperscale cloud providers are ramping up custom AI chip deployments.

And the growth wasn’t just a revenue story. Non-GAAP EPS rose 54% YOY to $2.44, topping estimates, while adjusted EBITDA reached a record $15.2 billion, up 52% YOY and representing a hefty 69% of revenue. Free cash flow also jumped 60% to nearly $10.3 billion, showing Broadcom is turning its AI-fueled growth into serious cash.

However, a wrinkle appeared. Infrastructure Software, led by VMware, generated $7.2 billion in revenue, up 9% YOY. That looks rather modest beside the 79% YOY growth in Semiconductor Solutions, underscoring how much of Broadcom’s current momentum is being driven by AI and semiconductors.

Then came the guidance. Broadcom expects Q3 revenue of approximately $29.4 billion, implying 84% YOY growth. AI semiconductor revenue alone is projected at $16 billion – more than triple the $5.2 billion generated in the year-ago quarter.

Yet, despite the blockbuster results and upbeat outlook, AVGO stock fell after the report. Expectations were already sky-high. Management reaffirmed its longer-term outlook rather than raising the bar, and for some investors, that simply wasn’t enough. Sometimes, on Wall Street, beating expectations only counts if you beat the expectations investors have already priced in.

With Broadcom’s Q3 fiscal 2026 earnings report just around the corner, investors have plenty to keep an eye on. The company is set to report its results and business outlook on Wednesday, Sept. 2, after the market closes, and Wall Street is already leaning into the bullish side.

The numbers certainly help explain why. Analysts expect Q3 revenue to climb to $29.43 billion, while EPS is projected to surge 124.6% YOY to $2.83. And the Street is not expecting the momentum to stop with Q3. For fiscal 2026, analysts see revenue reaching $106.1 billion, with EPS jumping 81.9% annually to $10.24. Better yet, earnings are expected to take another big step higher in fiscal 2027, rising 71.3% YOY to $17.54 per share.

What Do Analysts Expect for Broadcom Stock?

Wall Street remains bullish on AVGO stock, with the shares carrying an overall “Strong Buy” rating. Of the 42 analysts tracking the stock, 33 back it with a “Strong Buy,” three have a “Moderate Buy,” while just a handful of six sit on the sidelines with a “Hold” rating.

AVGO’s average target price of $517.31 suggests 39.2% upside potential from here. Yet the Street’s highest $675 price target, set by BNP, hints that the stock could rise as much as 81.7%. If Broadcom continues to capitalize on custom silicon and the expanding AI infrastructure boom, that bullish call starts to look less like a stretch and more like a bet worth watching.