Here’s Why I’m Buying More Broadcom as Spiking Treasury Yields Rock AI Stocks

Broadcom Inc. (NASDAQ: AVGO) reported Q2 FY2026 AI semiconductor revenue of $10.80 billion, up 143% year-over-year, and guided Q3 AI revenue to $16.0 billion, with a fiscal 2027 target exceeding $100 billion, as the company benefits from hyperscalers like Alphabet, Meta Platforms, and OpenAI committing to multi-year custom ASIC contracts. Despite a 12.87% weekly drop in AVGO shares triggered by the 10-year Treasury yield hitting 4.75% on July 31, the company posted Q2 operating income of $10.788 billion (up 85.07%), free cash flow of $10.262 billion (46% of revenue), and a 69% adjusted EBITDA margin, while raising its dividend for the 15th consecutive year and authorizing a $10 billion buyback. The author, a 24/7 Wall St. contributor, argues Broadcom's forward P/E of 20x and 15-year dividend streak make it a better buy than Nvidia, despite risks from customer concentration and $91.467 billion in total liabilities from the VMware deal.

I keep hitting the buy button on Broadcom NASDAQ:AVGO https://247wallst.com/companies/AVGO/ | AVGO Price Prediction https://247wallst.com/companies/avgo/price-prediction , and last week’s selloff handed me another reason to do it. When the 10-year Treasury yield https://247wallst.com/investing/2026/05/14/hyperscalers-now-competing-with-us-treasury-for-capital-driving-up-government-borrowing-costs/ ripped to 4.75% on July 31 and dragged AI names lower, AVGO fell 12.87% in a single week. I added again. Here is what pulls me back. Broadcom designs the custom ASICs https://247wallst.com/investing/2026/08/11/beyond-gpus-as-hyperscalers-flex-their-own-chips-a-new-kind-of-ai-premium-is-in-the-cards/ that hyperscalers like Alphabet NASDAQ:GOOGL https://247wallst.com/companies/GOOGL/ , Meta Platforms NASDAQ:META https://247wallst.com/companies/META/ , and OpenAI are locking into multi-year contracts to run their AI clusters. When borrowing costs climb, hyperscalers get pickier about capex, and pickier hyperscalers pick cheaper silicon over general-purpose GPUs. That is Broadcom’s edge, and rising Treasury yields sharpen it. Data That Keeps Me Adding Start with the AI ramp. Q2 FY2026 AI semiconductor revenue https://247wallst.com/investing/2026/02/02/broadcom-and-tsmc-emerge-as-big-winners-in-custom-ai-chip-boom/ reached $10.80 billion, up 143% year-over-year. Management guided Q3 AI revenue to $16.0 billion, over 200% year-over-year, and reiterated a fiscal 2027 target of “in excess of $100 billion”. Q2 AI bookings alone were over $30 billion against $10.8 billion shipped, with Hock Tan saying visibility now extends to 2028. That pipeline sits on signed contracts, including a 3 gigawatt Meta MTIA commitment through 2028 and a 10 gigawatt OpenAI deployment by 2029. Second, the profitability is already here. Q2 operating income hit $10.788 billion, up 85.07% year-over-year. Free cash flow was $10.262 billion, or 46% of revenue. Adjusted EBITDA margin landed at 69% of revenue. Cash on the balance sheet more than doubled year-over-year to $19.628 billion. Fiscal 2025 threw off $26.914 billion in free cash flow. Third, capital returns. Broadcom has raised its dividend for 15 consecutive years since fiscal 2011. The current quarterly payout is $0.65, and the company paid $3.1 billion in Q2 dividends. Management also authorized a $10 billion buyback through December 31, 2026, with $7.8 billion used in Q1 and another $600 million in Q2. Why AVGO, Not Nvidia NVIDIA NASDAQ:NVDA https://247wallst.com/companies/NVDA/ is the reflex pick, and I own some. My money keeps landing here because Broadcom trades at a forward P/E of 20x, a rare multiple for a business guiding AI revenue growth over 200% next quarter. Broadcom pairs that with a 15-year dividend increase streak https://247wallst.com/investing/2026/03/02/these-dividend-aristocrats-have-raised-their-dividends-for-25-years/ that Nvidia’s token payout cannot match, plus the analyst target sits at $527.88. As for the Treasury bonds many retirees are reaching for, 4.65% is fair income, and it caps at 4.65%. Broadcom is compounding free cash flow at 60.07% year-over-year. Risk I’m Watching Customer concentration. A handful of hyperscalers drive the AI ramp. If Google, Meta, or OpenAI slow orders or shift to fully internal designs, the guidance breaks. Broadcom also carries $91.467 billion in total liabilities from the VMware deal, and higher rates make servicing that debt costlier. What blunts the risk for me is booking visibility through 2028, the gigawatt-scale contractual commitments already logged, and the fact that shareholders’ equity climbed to $87.691 billion while total liabilities actually declined 3.76% year-over-year. Forward Conviction I Keep Acting On Rate fear is compressing growth multiples, and AVGO now sits at $364.03, well below its 52-week high of $494.18. Full-year FY2026 AI revenue is guided to $56 billion, with the path to over $100 billion in FY2027 already backed by customer commitments. When the market marks down a business generating $26.914 billion in annual free cash flow with a 15-year dividend growth streak because the 10-year moved 5 basis points, I do not sit on my hands. I buy more. Contact email protected for any questions or corrections.