Key Takeaways Morgan Stanley maintains Overweight rating on Broadcom (AVGO) with $502 price target Firm forecasts Broadcom will maintain approximately 80% of Google’s TPU business over the lo
Broadcom (AVGO) shares climbed 2.85% on Tuesday following Morgan Stanley’s reassurance that concerns over MediaTek threatening Broadcom’s leadership position in Google’s tensor processing unit (TPU) supply chain are overblown.
Joseph Moore, the firm’s analyst, maintained his Overweight rating while confirming the $502 price target. He expressed to investors that the stock’s year-to-date lag has been somewhat puzzling considering Broadcom’s robust AI segment performance.
“We think there are a few reasons for the weakness,” Moore explained, highlighting that investors have gravitated toward faster-growing AI semiconductor stocks. However, he identified the primary concern as the ongoing speculation surrounding MediaTek versus Broadcom for Google TPU manufacturing.
His assessment: the market has misjudged this competitive dynamic.
Moore recognized that MediaTek does present a genuine opportunity — Google faces cost optimization challenges and prefers diversifying its supplier base. These are valid strategic reasons for Google to engage MediaTek for certain 3nm design projects.
Yet Moore doesn’t anticipate this leading to substantial market share erosion for Broadcom.
Morgan Stanley’s central scenario envisions Broadcom maintaining approximately 80% of Google’s TPU supply in the long run. Moore drew parallels to the previous year’s Marvell/Alchip situation involving Amazon’s Trainium chip, where concerns about complete displacement 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 publicly communicated long-term target sits at merely 15-20% market share — far from a market takeover.
MediaTek also faces significant operational obstacles. Morgan Stanley’s Taiwan semiconductor analysts highlighted that MediaTek requires CoWoS packaging infrastructure for 2nm TPU manufacturing, while its EMIB packaging technology remains unproven at the volumes Google demands. These represent substantial challenges to overcome.
Broadcom possesses a supply chain advantage that competitors cannot easily duplicate. The company has already secured HBM memory supply through existing agreements, which diminishes any potential cost benefits MediaTek might propose.
Morgan Stanley forecasts Broadcom will deliver approximately $120 billion in AI-related revenue during fiscal 2027. TPU-associated revenue should comprise roughly $80 billion of that figure, although the firm anticipates TPU’s proportion of total AI revenue will gradually decline to about 60% as additional ASIC clients commence production.
Moore revealed that Broadcom expects “multiple” new ASIC customers to begin ramping up operations in the latter half of 2027, creating another growth avenue beyond Google.
The investment firm positioned AVGO as “a close #2 behind NVIDIA” and among its top AI compute stock selections, highlighting Broadcom’s custom ASIC expertise, networking business, and expanding revenue streams.
NVDA advanced 3.79% on Tuesday. GOOGL increased 1.22%. MediaTek’s Taiwan-listed shares (2454.TW) declined 4.31%.
The post Broadcom (AVGO) Stock: Why Morgan Stanley Isn’t Worried About the MediaTek Challenge appeared first on Blockonomi.
