Is the Broadcom Selloff a Buying Opportunity Amid AI Margin Concerns?

The recent selloff in Broadcom (AVGO) stock has sparked debate among investors about whether the pullback represents a compelling entry point or a cautionary signal. As the semiconductor giant navigates the dual forces of AI-driven demand and margin pressures, a nuanced analysis of technical support levels and fundamental resilience is critical to assessing the stock's near-term prospects.

Technical Support Levels: A Foundation for Rebound Potential

Broadcom's stock has historically found refuge at key technical support levels, which could serve as a buffer against further declines. As of November 26, 2025, the 20-day SMA sits at $375.84, while the 50-day SMA is at $361.56. These levels are particularly significant given the stock's recent volatility: after a correction to $337, AVGO rebounded off the 20-week SMA, a critical long-term support threshold.

The Relative Strength Index (RSI) currently stands at 72.78, indicating overbought conditions, suggesting a potential pullback. However, the Moving Average Convergence Divergence (MACD) remains bullish, with a positive histogram of 2.71, signaling sustained momentum in the short term. For a selloff to be considered a buying opportunity, the stock must hold above these key support levels. A break below the 20-day SMA could trigger further selling, but a rebound above $375.84 would reinforce the stock's technical foundation.

Fundamental Resilience: AI Growth vs. Margin Risks

Broadcom's fundamentals remain robust, underpinned by its dominance in the AI semiconductor market. The company reported Q4 revenue of $18.02 billion, with AI semiconductor revenue growing 16.4% year-over-year. Analysts have raised price targets, with institutions like Oppenheimer and UBS projecting targets as high as $472. This optimism is justified by Broadcom's trailing earnings per share (EPS) of $3.88 and a forward EPS of $9.39, reflecting strong profitability.

However, margin compression looms as a critical risk. In its Q4 earnings report, Broadcom warned of a 100 basis point decline in Q1 gross margins due to the growing share of AI-related sales, which carry lower margins compared to traditional software products. CFO Kirsten Spears highlighted that system sales - where component costs are passed through to customers - could further pressure margins. While demand for AI infrastructure remains robust, investors must weigh the sustainability of Broadcom's growth model against these structural challenges.

Balancing Technical and Fundamental Signals

The interplay between technical and fundamental factors creates a complex picture. On one hand, Broadcom's strong revenue growth and bullish analyst sentiment suggest the stock is well-positioned to recover. On the other, the overbought RSI and margin risks point to near-term volatility. The selloff on December 12, 2025 - nearly 9% despite a record Q4 revenue beat - exemplifies this tension. The decline was driven by concerns over margin compression, overshadowing otherwise positive fundamentals.

For investors considering a purchase, the key is to monitor whether the stock holds above the $375.84 level. A successful defense of this support would validate the technical case for a rebound, while a break below it could signal deeper selling pressure. Fundamentally, Broadcom's ability to mitigate margin risks through pricing power or cost optimization will determine whether the AI growth story remains intact.

Conclusion: A Calculated Opportunity

The Broadcom selloff presents a nuanced opportunity. Technically, the stock's proximity to key support levels and strong MACD suggest a potential rebound if the pullback is contained. Fundamentally, the company's AI-driven revenue growth and bullish analyst ratings reinforce its long-term appeal. However, margin pressures and geopolitical risks - such as tariffs - introduce uncertainty.

Investors should approach this opportunity with caution, using the selloff as a chance to add to positions only if the stock holds critical support levels and management addresses margin concerns effectively. For now, Broadcom remains a high-conviction play in the AI sector, but patience and discipline will be essential in navigating its near-term volatility.