Broadcom (NSDQ:AVGO) The US$100bn AI Backlog Investors Need to Question

The AI Backlog Is Real, But So Is the Risk

Broadcom is one of those businesses where investors cannot ignore the quality of the franchise, but they also cannot ignore the premium now attached to the share price.

We remain highly confident in the strength of Broadcom’s business model. Its application-specific integrated circuit business has become the standout growth engine, driving significant top-line growth, margin expansion and earnings momentum.

This is being supported by extraordinary demand visibility. In Q1 2026, CEO Hock Tan cited US$73 billion in backlog and order commitments. By Q2, bookings exceeded US$30 billion in that quarter alone, taking the implied figure closer to US$100 billion. Broadcom’s latest 10-Q showed total performance obligations of US$164.6 billion across committed semiconductor and software contracts.

With that level of contracted revenue, it is not hard to understand why the market is willing to pay a premium for the stock. Broadcom has become one of the clearest beneficiaries of the AI infrastructure buildout, with a backlog profile that gives investors unusually strong visibility over future revenue.

The key question now is whether that premium is already fully reflected in the share price, or whether Broadcom still has room to run.

US$100bn AI Backlog Comes With Customer Concentration Risk

We think the first thing investors need to understand is what sits behind Broadcom’s enormous AI backlog.

With roughly US$100 billion in AI backlog and commitments, FY26 AI revenue expectations of around US$56 billion, and forecasts pointing to as much as US$100 billion by FY27, the key question becomes simple. Who are the customers, and how realistic is this revenue ramp?

AVGO AI Customers

So far, Broadcom has six major AI customers, two of which remain undisclosed. Google has been an anchor customer since 2014, with Broadcom playing a central role in developing multiple generations of Google’s TPU architecture. This relationship remains deeply embedded, with Google expected to expand TPU capacity significantly through 2027.

Broadcom is also working with Meta on its MTIA custom silicon program, with contracts reportedly extending through to 2029. Anthropic is indirectly exposed through Google’s TPU infrastructure, while OpenAI has also emerged as a major customer through a multi-year collaboration to develop its first custom AI accelerator, with potential capacity commitments reaching up to 10 gigawatts. So that is 6 customers total.

New Apple deal – Apple is Broadcom’s single largest customer

Broadcom also strengthened its long-standing relationship with Apple.

On 6 July, the company announced an extension of its existing partnership with Apple for the development of wireless chip infrastructure. Importantly, the agreement also expands the relationship into new custom silicon opportunities, with Broadcom expected to develop ASICs across a broader range of Apple products.

This is significant because Apple is currently Broadcom’s largest customer. Extending and broadening that relationship provides another layer of revenue visibility and reinforces Broadcom’s position as a critical supplier to some of the world’s largest technology platforms.

The market responded positively, with Broadcom’s share price rising 5.3% following the announcement. For investors, the key point is that Broadcom’s custom silicon opportunity is not limited to AI hyperscalers. The company is also deepening its role with Apple, adding further support to the view that Broadcom remains one of the highest-quality semiconductor franchises in the market.

What investors need to be wary of

Broadcom’s AI revenue opportunity is real, but it is also highly concentrated. The company is tied to a small number of the largest AI infrastructure buyers in the world, including Google, Meta, OpenAI and Anthropic. These are the companies leading the large language model race, and they are spending aggressively to secure compute capacity.

However, that concentration also matters. OpenAI, for example, reportedly burned more than US$20 billion in cash from operations last year and is still not profitable. That does not mean the demand is not real, but it does mean investors need to assess the funding risk behind these enormous commitments.

For Broadcom’s backlog to convert into revenue, its customers need continued access to capital. The hyperscalers can support that through their own balance sheets, but companies like OpenAI are still dependent on external funding, strategic partnerships and infrastructure financing to sustain the pace of buildout.

The opportunity is huge, but it is not risk-free.

Is Broadcom a worthwhile investment

This analysis has focused heavily on Broadcom’s future revenue opportunity, primarily because that is the story the market is currently paying for.

On a forward EV to revenue basis, Broadcom trades at around 17x. That is a demanding multiple and clearly reflects market expectations for significant top line growth over the next few years.

However, the valuation looks more balanced when viewed through a profitability lens. Broadcom’s forward GAAP P/E sits at around 41x, which is still high in absolute terms. But when compared with expectations for roughly 70% EPS growth in FY26, the valuation becomes more reasonable.

This is where the PEG ratio becomes useful. The PEG ratio measures the price investors are paying relative to expected earnings growth. On this basis, Broadcom’s PEG ratio sits at around 0.5, suggesting the market may still be paying a reasonable price for the level of growth being delivered.

In other words, Broadcom is not a cheap stock on traditional valuation metrics. But if the company can deliver on the revenue and earnings growth currently being forecast, the premium valuation becomes easier to justify.

We have initiated a small position in Broadcom around the current share price for the reasons outlined above.

At the same time, we acknowledge the risks attached to the stock, particularly around valuation, customer concentration and the need for Broadcom to convert its substantial backlog into recognised revenue. That is why we have not gone “all in” at this stage.

However, if Broadcom can successfully convert its backlog into revenue and deliver on current earnings expectations, we believe there could still be further upside ahead.