Morgan Stanley laid out the specific developments it believes Broadcom (AVGO) needs to see before the stock can regain its prior share-price momentum. In a note, analyst Joseph Moore said investors repeatedly ask "what about Broadcom?" following the firm’s recent work on NVIDIA, and he set out the variables that will determine whether AVGO’s underperformance can be reversed.
Core issues and the firm's view
Moore told clients that Broadcom’s outlook depends on "clarity on competitive dynamics with TPU & margins on racks," while stressing that the firm still sees "a strong multiyear growth path." A central question is whether customers buying ASICs with "customer-owned tooling" could chip away at Broadcom’s market position. Morgan Stanley labels that concern as meaningful but believes it is being overemphasized: Moore wrote that while the concern "is not nothing, we think they are overblown."
TPU competition and MediaTek
The note points to a specific competitive development - the shift of some TPU work to MediaTek - but characterizes that shift as a tail risk rather than the base case. Morgan Stanley emphasized uncertainty about Google’s alternative chip, calling it "risk silicon" that "may or may not be viable."
Racks, Anthropic and profit margins
Another axis of uncertainty involves revenue and margin implications from rack sales, including those tied to Anthropic. The firm said the stock needs "clarity around these new opportunities," especially how the rack business will affect profitability and the durability of those margins. Moore also noted management appears to be signalling "gross margin stability even with the racks."
Valuation and broader AI effects
Valuation pressure outside of AI segments remains part of the debate, but Morgan Stanley expects that AI-driven demand will have positive spillover effects across the semiconductor ecosystem. That expectation underpins the view that current concerns may be excessive.
Bottom line from Morgan Stanley
"There is probably too much concern now,"
Moore concluded that improving visibility and "solid market share" could support a recovery for AVGO. At the same time, the analyst said the firm "modestly prefer[s] NVDA at these levels."
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