Broadcom (AVGO) stock has gained about 36% since the April 6 closing price of $314.43, trading at $428.61 according to Yahoo Finance at the time of writing, Friday afternoon, May 15. Meanwhile, the SPDR S&P 500 index (SPY) is up about 12.5% in the same period.
Why has Broadcom outpaced the S&P 500 so much since that date? The stock’s rally began on that date, when the company announced it had extended its partnerships with Google and Anthropic.
Other key news has also boosted the stock.
Broadcom also extended its partnership with Meta.
Intel’s earnings boosted confidence in the semiconductor sector.
Broadcom unveiled VMware Cloud Foundation (VCF) 9.1, an infrastructure platform for production AI workloads on May 5. This move was very important for Broadcom, as it helped enhance its most profitable revenue segment.
The stock is currently trading about 2.5% down. Isolating the exact cause of the drop is difficult, but there has been some bad news for the stock.
Shutterstock
Key recent news for the Broadcom stock
Broadcom has lost an appeal challenging a 19.1 billion won ($12.75 million) fine imposed by Korea’s Fair Trade Commission for forcing unfavorable contract terms on Samsung Electronics, reported Seoul Economic Daily.
UBS analysts said in their recent research note that, after conducting quantitative analysis, they found that every single Magnificent Seven stock member, excluding Tesla but including Broadcom, shows as extremely crowded long, according to Proactive. Swapping Tesla for Broadcom in this analysis makes sense, as Broadcom is a much more AI-heavy stock, especially given its networking stack and TPUs.
More Tech Stocks:
- BofA resets Google stock price target after earnings smasher
- Bank of America resets Microsoft stock forecast after earnings
- Goldman Sachs resets Nvidia stock forecast ahead of earnings
The company, with a large product portfolio spanning wired infrastructure, wireless communications, enterprise storage, and industrial end markets, also faces many competitors. Currently, semiconductor stocks tend to get a boost when one of them scores a win, as the AI boom makes it seem there is no limit to growth.
Bank of America recently raised its 2030 AI data center systems total addressable market (TAM) outlook to approximately $1.7 trillion from $1.4 trillion and reset the stock price target for Marvell, one of Broadcom’s main competitors.
Broadcom has scheduled its Q2 earnings report for June 3, and analysts are already resetting their price targets ahead of earnings.
Wells Fargo and TD Cowen raise Broadcom stock price targets
Wells Fargo analyst Aaron Rakers updated his opinion on Broadcom stock, according to TradingView.
Rakers is one of the analysts with the best track records out there. His TipRanks profile shows that he ranks as 11th out of 12,243 Wall Street analysts, with a success rate of 74% and an average return of 50.5%.
He made a new “pluggable gigawatt-driven” model for AI chip demand based on hyperscaler power capacity. It shows how AI silicon demand corresponds to physical data center power capacity, and it is estimated that AI semiconductor revenue is running 30% to 40% higher than prior consensus, according to 24/7 Wall St.
Rakers reiterated an overweight (buy) rating for Broadcom stock and raised his price target to $545 from $430.
TD Cowen analyst Joshua Buchalter also updated his opinion on Broadcom stock, according to Investing.
He is also among the top analysts, ranking 69th, with a 72% success rate and an average return of 43.3%.
Buchalter believes Broadcom will meet or exceed the 30% quarter-over-quarter growth target for Q2, as growth is supported by TPU and networking demand.
He reiterated a buy rating for Broadcom stock and raised the price target to $500 from $405.
In a research note from May 13, shared with me, Bank of America analyst Vivek Arya and his team reset stock price target for AMD which is also one of Broadcom’s competitors, and also updated their opinion on Broadcom stock. He ranks 80th, with a 65% success rate and an average return of 28.5%.
Arya reiterated a buy rating for Broadcom stock and a target price of $450, based on a 26x multiple of his calendar-year 2027 price-to-earnings estimate.
Bank of America analysts noted downside risks for Broadcom:
- Semiconductor cycle risks
- High exposure to Apple and Google with potential design out risks
- Competitive risks in networking, smartphone, storage, and enterprise software markets
- Frequent acquirer of assets, which increases financial and integration risks
- Large $60 billion net debt
