Broadcom Inc. (NASDAQ:AVGO) has emerged as one of the biggest beneficiaries of the artificial intelligence boom. The company has built a strong position in the AI market by supplying custom AI chips and networking solutions used by some of the world’s largest cloud companies. However, investors have recently become more cautious about its outlook. Much of that concern stems from MediaTek’s expanding role in Google’s custom AI chip program, which some investors believe could reduce the company’s market share. These concerns have raised questions about Broadcom’s ability to maintain its leadership in the AI market.
Addressing these concerns, Morgan Stanley argues that investors are placing too much emphasis on the competitive threat from MediaTek. The firm acknowledged that MediaTek has won some design work for Google’s tensor processing units and could secure additional opportunities as Google looks to diversify its suppliers. However, Morgan Stanley analyst Joseph Moore does not believe this will have a meaningful impact on Broadcom’s business. The analyst expects the company to remain Google’s primary TPU supplier, with roughly 80% market share over time. Analyst Moore also said the company’s well-established platform and supply advantages make it difficult for competitors to replace it. Based on this outlook, he reaffirmed his Overweight rating on the stock with a price target of $502.
Morgan Stanley analyst Joseph Moore remarked:
Our base case is that Broadcom maintains roughly 80% TPU share over time. We do not agree with the supply-chain framework that implies a rapid move toward Broadcom share loss. This view is consistent with MediaTek’s publicly stated long- term strategy of reaching 15-20% share. Said differently, we think MediaTek participation is real, but we believe the market is overstating the amount and pace of Broadcom share loss within TPU.
The company’s reliance on a small number of hyperscale customers, especially Google, remains one of the biggest risks to its AI growth story. As companies like Google diversify their supplier network and add new chip partners, Broadcom Inc. (NASDAQ:AVGO) could face increased pricing pressure and slower revenue growth. Given the stock’s premium valuation, even modest changes in sourcing strategies or customer spending could put pressure on the shares.
