Broadcom (NASDAQ:AVGO) plunged 5.43% as RBC initiates coverage with caution on margins and valuations

Broadcom Inc. (NASDAQ:AVGO) plunged 5.43% in pre-market trading on January 21, 2026, signaling investor caution amid mixed analyst sentiment and valuation concerns. The selloff followed RBC Capital’s initiation of coverage on the stock, assigning a “Sector Perform” rating and a $370 price target, while flagging risks tied to margin pressures and elevated valuations despite bullish AI growth prospects.

The analyst highlighted three key uncertainties: potential gross margin impacts from AI-driven demand, the sustainability of Anthropic’s growth trajectory, and the timing of OpenAI-related opportunities. While AI infrastructure demand and VMware synergies remain strong, the firm emphasized prudence around long-term margin expansion and valuation multiples. Meanwhile, insider selling activity, amplified by social media and data platforms, further fueled near-term pessimism.

Despite RBC’s cautious stance, other analysts have reiterated bullish views, citing robust AI chip sales and backlog strength. However, the market appears to be rotating toward alternative AI plays and recalibrating expectations for Broadcom’s execution amid broader macroeconomic and geopolitical risks. Investors are now closely watching upcoming earnings and whether institutional upgrades can offset lingering valuation skepticism.