Key Takeaways
- Morgan Stanley maintains Overweight rating on Broadcom (AVGO) with $502 price target
- Firm projects Broadcom will keep approximately 80% of Google’s TPU supply over the long term
- MediaTek competition characterized as “legitimate but not transformative”
- Fiscal 2027 AI revenue forecast reaches approximately $120 billion
- Market concerns about significant market share erosion labeled as “overblown”
Broadcom (AVGO) shares climbed 2.85% in Tuesday trading following a Morgan Stanley note that challenged investor concerns about MediaTek’s potential to disrupt Broadcom’s leading position in Google’s tensor processing unit (TPU) supply chain.
Morgan Stanley analyst Joseph Moore maintained his Overweight rating alongside a $502 price target, noting that the stock’s year-to-date underperformance appears inconsistent with the company’s robust AI segment expansion.
“We believe several factors contribute to this weakness,” Moore explained, identifying investor preference for higher-velocity AI semiconductor stocks. However, he emphasized that the primary concern centers on speculation regarding MediaTek potentially capturing Google TPU volume from Broadcom.
Moore’s assessment: market anxieties are misplaced.
The analyst conceded that MediaTek represents a genuine opportunity ā Google faces both budgetary constraints and strategic motivation to diversify its supplier base. These are valid corporate considerations that justify Google’s decision to engage MediaTek for certain 3nm design initiatives.
Yet Moore doesn’t anticipate this translating into substantial volume losses for Broadcom.
Analyst Projects 80% Share Retention
Morgan Stanley’s central scenario anticipates Broadcom retaining approximately 80% of Google’s TPU business in the years ahead. Moore drew parallels to the previous year’s concerns surrounding Marvell and Alchip regarding Amazon’s Trainium chips, where predictions of complete displacement similarly proved unfounded.
“We reject the supply chain analysis suggesting imminent erosion of Broadcom’s position,” Moore stated. He highlighted that MediaTek’s own publicly communicated long-term ambition targets only 15-20% market share ā far from a complete takeover.
MediaTek also confronts significant operational challenges. Morgan Stanley’s Taiwan semiconductor analysts indicated that MediaTek still requires CoWoS packaging infrastructure for 2nm TPU manufacturing, and its EMIB packaging capabilities remain unproven at Google’s required production volumes. These represent substantial technical obstacles.
Broadcom additionally possesses supply chain advantages that competitors cannot easily duplicate. The company has already secured HBM memory allocations through existing contractual arrangements, undermining any potential cost benefits MediaTek might theoretically provide.
Substantial AI Revenue Growth Projected
Morgan Stanley forecasts Broadcom will deliver approximately $120 billion in AI-related revenue during fiscal year 2027. TPU-associated revenue should contribute roughly $80 billion of that total, though analysts expect TPU’s proportion of overall AI revenue to gradually decline toward 60% as additional ASIC partnerships mature.
Moore revealed that Broadcom has “several” new ASIC clients scheduled to begin volume production during the latter half of 2027, creating additional growth vectors independent of Google.
The investment bank positioned AVGO as “a strong #2 following NVIDIA” and among its top AI infrastructure picks, emphasizing Broadcom’s custom ASIC expertise, networking portfolio, and expanding revenue streams.
NVDA advanced 3.79% on Tuesday. GOOGL increased 1.22%. MediaTek’s Taiwan-listed shares (2454.TW) fell 4.31%.
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