Key Takeaways
- Morgan Stanley maintains Overweight rating on Broadcom (AVGO) stock with $502 price target
- Joseph Moore, analyst at Morgan Stanley, forecasts Broadcom will maintain approximately 80% of Google’s TPU orders
- MediaTek’s presence described as “legitimate but not threatening” to Broadcom’s market position
- Broadcom anticipated to achieve approximately $120B in AI-related revenue by fiscal year 2027
- Predictions suggesting 50% market share erosion or complete displacement deemed “unfounded”
Shares of Broadcom (AVGO) climbed 2.85% during Tuesday’s trading session following Morgan Stanley’s reassurance to investors concerned about MediaTek potentially challenging Broadcom’s leading role in providing tensor processing units (TPUs) to Google.
Joseph Moore, the firm’s analyst covering the semiconductor sector, maintained his Overweight recommendation while reaffirming a $502 price objective. In his note to investors, Moore expressed some surprise at the stock’s lackluster year-to-date performance, particularly considering Broadcom’s robust artificial intelligence segment expansion.
“Several factors appear to be contributing to this weakness,” Moore explained, highlighting investor preference for AI chip companies exhibiting higher growth velocities. However, the primary concern weighing on sentiment, according to Moore, centers on speculation regarding MediaTek potentially capturing share from Broadcom in Google’s TPU supply chain.
Moore’s assessment: Wall Street is misreading the situation.
The analyst didn’t dismiss MediaTek’s opportunity entirely — Google faces genuine cost optimization pressures and strategic considerations around supplier diversification. These represent valid business rationales for engaging MediaTek on certain 3nm design initiatives.
Nevertheless, Moore argues this won’t result in meaningful market share erosion for Broadcom.
Morgan Stanley Projects 80% Market Share Retention
The investment bank’s central scenario anticipates Broadcom maintaining approximately 80% of Google’s TPU procurement over the long term. Moore drew parallels to the previous year’s speculation surrounding Marvell and Alchip regarding Amazon’s Trainium processors, where concerns about complete supplier replacement similarly proved exaggerated.
“The supply chain narrative suggesting rapid Broadcom share deterioration lacks merit,” Moore stated. He emphasized that MediaTek’s own publicly communicated long-range target stands at merely 15-20% market penetration — far from a complete takeover.
MediaTek also confronts substantial operational challenges. Morgan Stanley’s semiconductor research team in Taiwan highlighted that MediaTek requires CoWoS packaging infrastructure for 2nm TPU manufacturing, while its EMIB packaging capabilities remain unproven at the volume levels Google demands. These aren’t trivial obstacles to overcome.
Broadcom possesses supply chain advantages that competitors cannot easily duplicate. The company has already secured HBM memory allocations through existing contractual agreements, which undermines any theoretical cost advantages MediaTek might present.
Substantial AI Revenue Projections
Morgan Stanley’s financial models project Broadcom generating approximately $120 billion in artificial intelligence-related revenue during fiscal 2027. TPU business is forecast to contribute roughly $80 billion of that total, though analysts expect TPU’s proportion of overall AI revenue to decline modestly to around 60% as additional ASIC clients begin production.
Moore indicated that Broadcom has “several” new ASIC partners scheduled to commence volume shipments during the latter half of 2027, providing additional growth drivers beyond the Google relationship.
The investment firm positioned AVGO as “a strong #2 after NVIDIA” and among its top AI infrastructure picks, highlighting Broadcom’s custom ASIC expertise, networking product portfolio, and expanding revenue base diversification.
NVDA advanced 3.79% on Tuesday. GOOGL appreciated 1.22%. MediaTek’s Taiwan-traded shares (2454.TW) declined 4.31%.
