Broadcom Inc. (AVGO) saw its stock rise by over 1% to close at $389.32 on Tuesday, driven by a notable shift in investor focus from software to hardware. This movement followed IBM's release of disappointing Q2 earnings, which revealed a decrease in revenue and profit that missed analyst forecasts.

Market Dynamics

IBM’s CEO, Arvind Krishna, indicated that customers are reallocating their budgets towards storage, memory, and server investments, anticipating price hikes associated with AI infrastructure developments. This trend has shifted attention onto hardware producers like Broadcom, known for manufacturing custom AI chips and networking silicon. Despite the recent gain, AVGO's year-to-date performance is up only 13%, lagging behind many competitors in the chip sector.

Concerns have arisen regarding Broadcom’s share of Google’s TPU chip business, especially with MediaTek emerging as a competitor. Analysts have debated how much of Google's workload will transition to MediaTek, adding uncertainty to Broadcom’s market position. However, Morgan Stanley analyst Joseph Moore remains optimistic.

Analyst Outlook

Joseph Moore reiterated a Buy rating for Broadcom with a price target of $502, citing AVGO as a key player in AI technology. He believes that fears about losing significant market share to MediaTek are overstated, projecting that Broadcom will retain approximately 80% of Google's TPU supplier business. Moore attributes this to Broadcom's superior capabilities in high-bandwidth memory supply and packaging, which are not easily replicated.

Moore also highlighted that Broadcom has new ASIC customers expected to ramp up in the latter half of 2027, indicating potential for growth beyond its current relationship with Google. Currently, Wall Street shows a Strong Buy consensus for AVGO, with 23 Buy ratings and just three Holds, leading to an average price target of $513.29, suggesting a 32% upside from current levels.

On Tuesday, the stock traded within a range of $384.71 to $397.24, reflecting its volatility over the past year, which has seen a 52-week range between $273.00 and $495.00.

This material is informational and not financial advice.