Key Points
- Analysts project that hyperscaler capital expenditures will increase significantly in 2026. That's good news for Broadcom.
- Could Broadcom update its AI addressable market estimates in the next few months? Last time it did, shares catapulted.
- Despite a 10% drop in shares, Broadcom has performed relatively well versus the overall semiconductor industry.
Semiconductor giantBroadcom (NASDAQ: AVGO) has lost some of its luster over the past several weeks. Since hitting an all-time high of nearly $386 on Oct. 29, Broadcom shares are down around 10% year-to-date.
However, big tech spending projections are a reason for optimism going forward. A report from CreditSights helps highlight this.
CreditSights is part of Fitch, one of the world’s top credit rating agencies. Below, we’ll dive into why this analysis provides positive support for Broadcom’s outlook.
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Hyperscaler CapEx Set to Rise, AI CapEx Growth Could Be Much Stronger
Broadcom’s growth relies significantly on the growth in capital expenditure (CapEx) spending from hyperscalers. The world’s top five hyperscalers are generally accepted to be:
Notably, CreditSight estimates that total CapEx among these top five hyperscalers will increase by 36% to $602 billion in 2026. They believe “unprecedented AI infrastructure investments" will drive this. Simply put, this higher spending would significantly increase the addressable market through which Broadcom can generate sales, supporting the firm’s 2026 outlook.
Isolating AI-specific CapEx improves the picture even more for Broadcom. This is a better indicator of the company’s growth potential. Its custom accelerators and many of its networking chips are explicitly driven by AI spend. Thus, AI CapEx directly boosts its addressable market.
CreditSights estimates that around 75%, or $450 billion, of total CapEx among these hyperscalers will go to AI in 2026. Meanwhile, Evelyn Advisors projects that total CapEx spending from these players will reach $365 billion in 2025. Assuming 75% of this goes to AI as well, this would equate to around $274 billion in AI spending. If this number rose to $450 billion, it would represent a 64% growth rate in AI-specific CapEx.
Clearly, this would be much greater than the 36% total CapEx growth projection. Given this, Broadcom could benefit from a significantly stronger growth rate than CreditSight’s already strong total CapEx growth forecast. This data adds further support to Broadcom's 2026 outlook.
Broadcom Could Announce AI SAM Update in the Next Several Months
Still, it is important to note that these are third-party estimates and don’t come from Broadcom itself. However, there is significant potential that Broadcom could update its own addressable market estimates relatively soon. On the company’s Q2 2025 earnings call, some Wall Street analysts wanted Broadcom to update its AI Serviceable Addressable Market (SAM) estimate. Currently, Broadcom’s AI SAM estimate is between $60 billion and $90 billion. Chief Executive Officer Hock Tan vehemently pushed back on updating this figure during the call.
However, he said that Broadcom would be happy to give an update once the firm has better visibility. He added that this likely would not come until 2026. A sizable increase to the company’s AI SAM estimate has a strong chance of being an upside catalyst for the stock. When the company announced its current AI SAM during its Q4 2024 earnings call, shares rose by over 24% the next day.
The company recently announced a huge deal with OpenAI. It's plausible this could give Broadcom enough visibility to update its AI SAM at its Dec. 11 earnings release. However, it may wait until its Q1 2026 earnings release to do so. This would come after Alphabet reports its Q4 2025 results, where it should provide CapEx estimates for 2026. Alphabet is generally believed to be Broadcom’s largest hyperscaler customer.
Alphabet’s Q4 2025 results should come out at the end of January 2026 or the beginning of February. Broadcom’s Q1 2026 results should come out in early March 2026. Investors should note that even though Broadcom may update its AI SAM estimates in the next few months, there is no guarantee it will.
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Broadcom Shows Relative Strength in Semiconductor Pullback
Despite Broadcom’s recent fall, investors may take solace in the fact that Broadcom has actually outperformed its industry over the past few weeks. The iShares Semiconductor ETF (NASDAQ: SOXX) and NVIDIA (NASDAQ: NVDA) also peaked on October 29. These assets have both declined by around 13% since then. Broadcom’s 10% drop, albeit smaller, provides some evidence of the company’s resilience amid a significant semiconductor slide.
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