Broadcom Inc. (AVGO:US) recently announced its third-quarter earnings and the stock did not take the news well. It dropped around 5.5% to $872.52 heading into the long weekend. The stock had a great bull run in the months of May and June, a time at which AI speculation was at its peak. Now, it seems that the hype is over and the stock is settling down.

It announced an EPS of $10.54 with a revenue of $8.88 billion. The result was above expectations as the demand for Broadcom’s networking equipment soared.

"Broadcom's third-quarter results were driven by demand for next-generation networking technologies as hyperscale customers scale out and network their AI clusters within data centers," Chief Executive Hock Tan said.

The question many investors are asking is whether AI is a big enough play to justify Broadcom’s comparison with Nvidia (NVDA:US). Broadcom generated $1 billion by selling AI chips in the third quarter. That’s a 50% quarter-over-quarter rise.

Going forward, Broadcom is expected to generate 15% of its annual revenues from AI. The same number is expected to rise to 25% next year. While Broadcom isn’t a direct AI player like Nvidia, its AI revenues cannot be ignored, something analysts have started to point out.

Analyst Ratings Update

A total of 9 analysts were quick to adjust their rating on the stock after its earnings report.

KeyBanc Capital Markets raised its price target from $940 to $1000. Oppenheimer moved its price target from $900 to $990. This is 22 times the expected earnings as per the firm’s own expectations. Similarly, Deutsche Bank maintained its Buy rating on the stock, moving its price target from $905 to $950. An average analyst rating of $971.36 indicated there is a lot of room for upside.

How Are the Politicians Trading Broadcom?

Ro Khanna, the Democrat Representative from California, has been a net seller this year, selling $133,000 - $345,000 worth of AVGO stock against just $1,000 - $15,000 worth of buying. It is clear that he has been reducing his exposure to the stock rather than just trading the hype. Most of his trades came at the end of the AI hype in May and June, securing him a timely exit.

On the contrary, Josh Gottheimer continues to believe in the company, buying $2,000 - $30,000 worth of stock in two different transactions at $637.95 and $821.63 each. With the stock trading just below the $870 mark in pre-market today, the New Jersey Democrat is sitting comfortably on his investment despite the negative reaction to the earnings.