Broadcom (AVGO) shares advanced more than 2% on Tuesday, extending the prior session's rebound even as the broader market and semiconductor peers retreated. The divergence followed a hotter-than-expected US consumer inflation reading that reinforced expectations the Federal Reserve will raise rates in December, with traders pricing in at least a 25-basis-point move and some positioning for 50 basis points.
Two company-specific catalysts drove the outperformance: JPMorgan's reaffirmation of its Overweight rating on Broadcom tied to Google's latest tensor processing unit (TPU) roadmap, and Anthropic's updated IPO filing, which disclosed substantial equipment leases with the chipmaker.
Google's TPU launch draws JPMorgan support
Google unveiled two new TPU variants on Monday, expanding its eighth-generation lineup to four systems this year. The TPU 8tx and TPU 8i Max intensify Google's challenge to Nvidia's dominance in AI silicon. Google said its TPU business now serves nearly 100 customers, spanning AI research labs, trading firms, and retailers.
The TPU 8i Max is particularly relevant for Broadcom. Google pairs two TPU 8i chips in a single package, doubling compute, on-chip memory, and high-bandwidth memory bandwidth while preserving the existing rack footprint. JPMorgan analyst Harlan Sur said the design aligns with Broadcom's 3-nanometre roadmap outlined in the brokerage's autumn research, and he expects the TPU 8i Max to begin ramping in the second half of 2027. Google's next-generation 2-nanometre TPU, designated v9.5 or v10, remains on track for mid-2028 production, according to Sur.
JPMorgan believes Broadcom continues to supply Google's highest-performance and highest-priority TPU programmes, providing uninterrupted revenue visibility through 2031. Google did not name Broadcom as the supplier in its announcement; JPMorgan's assessment rests on its own research and industry checks.
Broadcom competes with Nvidia by designing custom application-specific integrated circuits and AI accelerators for major technology companies including Google, Meta, and OpenAI. Nvidia shares have faced pressure amid a probe into CEO Jensen Huang's relationship with a Chinese businesswoman suspected by US officials of being a spy, a matter Nvidia is investigating internally.
Anthropic IPO adds to Broadcom's growth prospects
Anthropic's updated IPO filing also strengthened the investment case for Broadcom. The AI company plans to offer 825 million shares at $70 to $78 apiece, following its Form S-1 registration with the SEC last month. It intends to list on Nasdaq under the ticker ANT.
The filing disclosed five-year master equipment leases with Broadcom, through which Anthropic will receive hardware for dedicated data centre facilities operated by third parties. Rent payments over the life of the leases are expected to total approximately $161.2 billion, excluding interest.
Last month, DA Davidson analyst Gil Luria raised his Broadcom price target to $400 from $350 following the IPO filing. Luria wrote that the Anthropic S1 suggests the IPO will proceed, Anthropic will raise capital, and OpenAI will raise more capital in its own IPO next year, allowing Broadcom to meet expectations for the next couple of years. He noted that at a 16x multiple on 2027 EPS, AVGO trades as if the chances of those deals materialising are near zero, creating significant upside if both materialise.
Analysts see buying opportunity after sell-off
Institutional support has emerged after Broadcom's recent decline. Aureus Asset Management's Karen Firestone disclosed she increased her stake after the sell-off pushed valuations to roughly 11 to 12 times forward earnings.
Morgan Stanley said on Monday that last week's market sell-off appeared excessive. The brokerage expects some AI projects to be postponed from 2028 to 2029 rather than the broader capital expenditure cycle being derailed. Analysts said this could elongate the AI capex cycle, with positives including a smoother supply-demand rebalancing across the data center supply chain, improved credit outlook, and higher lease rates for compute. Morgan Stanley recommended buying the drop and identified Broadcom and Nvidia among semiconductor stocks offering investment opportunities.
This article is for informational purposes only and does not constitute financial advice.
