Key Takeaways
- Jay Goldberg at Seaport Research downgraded AVGO to Neutral from Buy, pointing to financing pressures in AI infrastructure
- A regulatory filing suggests Broadcom might participate in financing Anthropic’s massive data center project
- Just 3 out of 53 analysts tracked by FactSet maintain neutral stances on the stock
- Broadcom secured partnerships with Google and Anthropic this week
- The Google partnership extends through 2031, encompassing TPU development and AI networking components
Broadcom’s announcement of partnerships with Google and Anthropic this week sent shares soaring 6% on Tuesday. However, one analyst at Seaport Research examined the details more closely and came away with serious reservations.
Jay Goldberg downgraded his outlook on Broadcom from Buy to Neutral, making him a rare dissenting voice. Among the 53 sell-side analysts monitored by FactSet, only three maintain neutral-equivalent positions on the stock. The remaining 50 continue to recommend buying.
Goldberg’s skepticism doesn’t stem from operational weakness at Broadcom. He acknowledges the company is performing exceptionally well, with revenue projected to surge approximately 60% this year, fueled by robust demand for its specialized ASIC chips from clients including Google and Anthropic. That’s not where his concern lies.
Instead, his worry centers on a specific disclosure tucked away in a Broadcom regulatory document. The filing revealed that Anthropic will gain access to approximately 3.5 gigawatts of computing power through Broadcom. More tellingly, it mentioned that “the parties are in discussions with certain operational and financial partners” related to this infrastructure rollout.
Goldberg interpreted this language as an indication that Broadcom may become entangled in funding Anthropic’s data center construction. “The extent to which all the leading chip vendors are having to provide funding and/or backstops to their customers points to the industry’s strain,” he noted in his research.
Broadcom and Anthropic have not yet provided comments on the matter.
Semiconductor Giants Face Capital Deployment Challenges
Goldberg’s overarching thesis is that Broadcom, Nvidia (NVDA), and AMD (AMD) are confronting similar obstacles. Data centers operating at gigawatt scale require massive capital outlays, and the chip manufacturers enabling them are increasingly being drawn into financing arrangements.
According to Goldberg, while Broadcom’s financial exposure appears more limited than Nvidia’s, the situation nonetheless reflects an industry grappling with the immense capital requirements of AI infrastructure expansion.
The Google agreement announced this week involves Broadcom’s participation in tensor processing unit engineering through 2031. Additionally, Broadcom will deliver networking hardware for Google’s AI infrastructure throughout this timeframe.
However, Goldberg noted that Taiwan-based MediaTek might capture a portion of the TPU market this year — likely not substantial enough to significantly impact Broadcom’s growth, but possibly sufficient to strengthen Google’s bargaining position.
Valuation Reflects Optimistic Outlook
Goldberg’s assessment is clear-cut: Broadcom is executing effectively, but the stock price already incorporates this success. “We see its gains as fully factored into consensus now,” he stated.
AVGO has climbed 114% during the past year. Shares jumped 6% on Tuesday after the deal revelations and advanced roughly 4% more in Wednesday’s premarket session, lifted by broader market enthusiasm following news of a potential Iran cease-fire agreement.
