Broadcom (AVGO) shares surged 9% on Monday, leading a rebound in semiconductor stocks after last week's steep decline. The selloff had been driven by concerns that a Democrat-controlled Congress could slow data center expansion and derail the artificial intelligence boom. However, Monday's rally suggests investors are regaining confidence in the AI trade.
The broader market also benefited from falling oil prices. West Texas Intermediate crude futures dropped 3% to around $87 a barrel, while Brent crude slid 4% to approximately $94 a barrel. The Philadelphia Semiconductor Index gained more than 5% on the day, though it remained down over 6% over the previous five sessions.
Broadcom's gains may have been amplified by weakness in rival Nvidia, whose shares fell 6% after reports that its board had opened a probe into CEO Jensen Huang's relationship with a business executive suspected by US officials of being a Chinese spy. Broadcom competes with Nvidia in the AI chip market, designing custom application-specific integrated circuits (ASICs) and AI accelerators for major tech companies like Google, Meta, and OpenAI. These firms are increasingly seeking customized chips rather than relying solely on Nvidia's off-the-shelf GPUs. AMD, another Nvidia competitor, also rallied, rising 11% on Monday.
Morgan Stanley Says Selloff Overdone
Morgan Stanley analysts said last week's selloff appeared overdone, arguing that the likely outcome would be a postponement of some projects from 2028 to 2029 rather than a derailment of the broader capital expenditure cycle. "This has the potential to elongate the AI capex cycle, which has positives including: a smoother supply-demand rebalancing across the data center supply chain, improved credit outlook, and higher lease rates for compute," the analysts wrote in a note, as reported by Reuters. The brokerage recommended "buying the drop" and maintained a positive outlook on AI hyperscalers, including Amazon, Meta, and Alphabet. It also identified Broadcom and Nvidia among the semiconductor stocks offering investment opportunities.
VM API Project Accepted into CNCF Sandbox
Adding to the positive sentiment, Broadcom announced at KubeCon North America 2026 that its VM API open-source project had been accepted into the Cloud Native Computing Foundation Sandbox. More than 20 partner solutions have also been validated for VMware vSphere Kubernetes Service, signaling continued momentum in Broadcom's enterprise software business and its efforts to integrate VMware more deeply into the cloud-native ecosystem.
Anthropic IPO Filing Boosts Sentiment
Last month, DA Davidson analyst Gil Luria raised his price target on Broadcom to $400 from $350, following Anthropic's IPO filing. "Our reading of the Anthropic S1 leads us to believe the IPO will proceed, Anthropic will raise its capital, and next year OpenAI will raise more capital in its own IPO, allowing Broadcom to meet its expectations for the next couple of years," Luria wrote in a note to clients. "At the current 16x multiple on 2027 EPS, AVGO is trading as if the chances of that happening are near zero, which creates significant upside if those deals both materialize."
Anthropic filed its Form S-1 registration statement with the US Securities and Exchange Commission last month as it prepares to list shares on Nasdaq under the ticker ANT. The filing disclosed five-year master equipment leases with Broadcom, under which Anthropic will receive hardware for deployment in dedicated data centre facilities operated by third parties on its behalf. Anthropic said rent payments over the life of the leases total approximately $161.2 billion, excluding interest.
Earnings Expected to More Than Double in Q4
Broadcom is scheduled to report its fourth-quarter results on December 9. Ahead of the release, analysts expect the company to report diluted earnings per share of $3.45, up 114.3% from $1.61 in the year-ago quarter. Broadcom has exceeded Wall Street's EPS estimates in each of the past four quarters, highlighting its consistent earnings performance.
This article is for informational purposes only and does not constitute financial advice.
