Analysts run to Broadcom’s defense as investors worry about competition
Concerns about increased competition have put pressure on Broadcom, but Morgan Stanley came to the chipmaker’s defense, calling it a “core AI winner” second only to Nvidia. In a note to clients on Tuesday, Morgan Stanley analysts said concerns that Taiwan-based semiconductor company MediaTek could significantly steal Broadcom’s share of Google’s tensor processing unit (TPU) business have been overblown. It was reported in March that MediaTek was working with Alphabet to develop the next version of its custom chips. “Our view is that MediaTek participation is real but not disruptive,” the analysts wrote, reiterating a buy-equivalent rating on Broadcom shares with a $502 price target. Of course, analysts have noted that since Alphabet produces multiple generations of TPUs, it is incentivized to reduce its dependence on Broadcom (or any chip vendor) in order to cut costs and gain “vendor option.” But Broadcom’s relationship with Google seems to be fine. In April, Broadcom announced an extended chip deal with the search giant through 2013 to produce future versions of its chips. Broadcom also announced plans to provide Anthropic with approximately 3.5 gigawatts of computing capacity through Google chips. But Broadcom shares are down nearly 22% from their record closing high of $481.57 on June 2, despite rising nearly 3% on Tuesday. So far this year, the stock is up only about 14%, lagging far behind the iShares Semiconductor ETF, which is up nearly 90% this year. Nvidia also fell behind in the semiconductor category. The firm said it was surprised by Broadcom’s underperformance year-to-date, given the strength of its AI growth trajectory. “[Broadcom] “It should remain the majority TPU supplier with 80 percent share over time, and we see bearish calls for 50 percent share or eventual replacement as premature,” analysts wrote, adding that high bandwidth memory, packaging execution and scale mean Broadcom’s partnership with Google is likely to remain strong. Broadcom has some other challenges in the fire, too. In April, Meta extended its deal with Broadcom for its custom silicon. And last week, Apple announced an extension of its Broadcom partnership for $30 We also remain bullish on Broadcom’s AI future, which is why we raised our target price from $425 to $480 after its second-quarter financial report. We correctly placed the position in June as the stock tumbled more than 12% last Wednesday, after Apple provided additional details on the Broadcom deal. He said investors should consider taking some profits whenever possible. He also frequently touted Intel as the semiconductor name to buy, telling investors to jump on it during Tuesday’s Morning Meeting (Jim Cramer’s Charitable Trust is long AVGO, NVDA, and INTEL. See here for a full list of stocks.) By subscribing to the CNBC Investment Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. waits 45 minutes after sending a trading alert before buying or selling a stock in his portfolio Jim waits 72 hours after discussing a stock on CNBC TV THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OR CONNECTED WITH OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THE INVESTMENT CLUB HAS NO LIABILITY OR DUTY RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED BY THE INVESTMENT CLUB.
