Investing.com — Morgan Stanley said Broadcom’s recent underperformance could reverse as key uncertainties around competition, margins and valuation begin to clear, outlining what it believes the stock needs to resume its prior momentum.
Morgan Stanley analyst Joseph Moore wrote that investors most frequently ask “what about Broadcom?” after the firm’s recent analysis of NVIDIA.
He told investors in a note that AVGO’s outlook hinges on “clarity on competitive dynamics with TPU & margins on racks,” adding that the firm still sees “a strong multiyear growth path.”
A major focus is whether ASIC customers using “customer-owned tooling” could erode Broadcom’s position.
Moore wrote that while the concern “is not nothing, we think they are overblown.” He added that the shift of TPU work to MediaTek is viewed as a tail risk not base case, noting that Google’s alternative chip remains “risk silicon” that “may or may not be viable.”
Morgan Stanley also highlighted uncertainty around margins tied to Anthropic rack sales.
The firm said, “what the stock needs is clarity around these new opportunities,” particularly how the rack business affects profitability and durability. Moore wrote that “management seems to be signalling gross margin stability even with the racks.”
Valuation pressures in non-AI segments also remain part of the debate, though Morgan Stanley expects broader AI-driven benefits across the semiconductor ecosystem.
Moore concluded that “there is probably too much concern now,” saying the firm expects improving visibility and “solid market share” to support a potential recovery, even as it “modestly prefer[s] NVDA at these levels.”
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