Key Takeaways
- Morgan Stanley maintains Overweight rating on Broadcom (AVGO) with $502 price target
- Firm projects Broadcom will maintain approximately 80% of Google’s TPU supply long-term
- MediaTek’s entry described as “real but not disruptive” by analyst Joseph Moore
- Fiscal 2027 AI revenue forecast of approximately $120 billion for Broadcom
- Market concerns about dramatic share loss deemed “premature” by Morgan Stanley
Broadcom (AVGO) shares advanced 2.85% Tuesday following Morgan Stanley’s defense of the chipmaker’s competitive position against concerns that MediaTek could significantly erode its commanding share of Google’s tensor processing unit (TPU) supply chain.
Morgan Stanley analyst Joseph Moore maintained his Overweight rating and $502 price objective, expressing surprise at the stock’s relative underperformance this year despite robust AI segment expansion.
“We think there are a few reasons for the weakness,” Moore noted in his research report, citing investor preference for higher-growth AI chip stocks. However, he identified the MediaTek-Broadcom debate surrounding Google TPU production as the primary headwind.
Moore’s conclusion: market anxiety is misplaced.
The analyst conceded that MediaTek presents a legitimate opportunity — Google faces cost optimization pressures and seeks supplier diversification. This creates a valid business rationale for engaging MediaTek on 3nm design initiatives.
However, Moore doesn’t anticipate this development causing substantial market share erosion for Broadcom.
80% Market Share Retention Expected
Morgan Stanley’s baseline scenario projects Broadcom retaining approximately 80% of Google’s TPU business long-term. Moore drew parallels to last year’s Marvell/Alchip situation involving Amazon’s Trainium chips, where displacement fears similarly proved exaggerated.
“We do not agree with the supply-chain framework that implies a rapid move toward Broadcom share loss,” Moore stated. He emphasized that MediaTek’s own public long-term target stands at merely 15-20% market share — far from complete displacement.
Meanwhile, MediaTek faces significant execution challenges. Morgan Stanley’s Taiwan semiconductor analysts highlighted that MediaTek requires additional CoWoS packaging capacity for 2nm TPU manufacturing, while its EMIB packaging technology remains unproven at Google’s required production volumes. These represent substantial obstacles.
Broadcom enjoys supply chain advantages that competitors cannot quickly replicate. The company has secured high-bandwidth memory (HBM) supply through existing contractual commitments, limiting the practical cost benefits MediaTek could potentially deliver.
Substantial AI Revenue Growth Projected
Morgan Stanley forecasts approximately $120 billion in AI-related revenue for Broadcom in fiscal 2027. TPU business should contribute roughly $80 billion, though the firm anticipates TPU’s proportion of total AI revenue declining to around 60% as additional ASIC customers begin production.
Moore revealed that Broadcom has “multiple” new ASIC clients scheduled to ramp production in late 2027, providing additional growth drivers beyond the Google relationship.
The investment bank positioned AVGO as “a close #2 behind NVIDIA” among its top AI computing picks, highlighting Broadcom’s custom ASIC expertise, networking portfolio, and increasing revenue stream diversification.
NVDA rose 3.79% Tuesday. GOOGL advanced 1.22%. MediaTek’s Taiwan-listed shares (2454.TW) declined 4.31%.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
