Broadcom shares AVGO climbed more than 2% on Tuesday, extending the previous session’s sharp rebound as investors weighed fresh developments in Google’s artificial intelligence chip programme and the chipmaker’s relationship with major AI customers.
The gains came even as broader markets and semiconductor stocks fell after hotter-than-expected US consumer inflation data strengthened expectations of a Federal Reserve rate increase in December.
Traders have largely priced in at least a 25-basis-point hike, while the possibility of a larger 50-basis-point move has also emerged.
Google’s latest TPU launch draws JPMorgan support
Google introduced two new variations of its in-house tensor processing units (TPUs) on Monday, intensifying its challenge to Nvidia’s dominance in the AI chip market.
The company said its TPU 8tx and TPU 8i Max expand its eighth-generation lineup to four systems unveiled this year.
Its TPU business now serves nearly 100 customers, including AI research laboratories, trading firms and retailers.
The TPU 8i Max is particularly significant for Broadcom.
Google combines two TPU 8i chips into a single package, doubling computing power, on-chip memory and high-bandwidth memory (HBM) bandwidth while retaining the existing rack footprint.
JPMorgan reiterated its Overweight rating on Broadcom, with analyst Harlan Sur saying Google’s latest TPU design aligns with the Broadcom 3-nanometre roadmap outlined in the brokerage’s autumn research.
Sur expects the TPU 8i Max to begin ramping up in the second half of 2027.
He also said Google’s next-generation 2-nanometre TPU, designated v9.5 or v10, remains on track for production in mid-2028.
JPMorgan believes Broadcom continues to supply Google’s highest-performance and highest-priority TPU programmes, providing uninterrupted revenue visibility through 2031.
Google did not identify Broadcom as the supplier in its announcement.
JPMorgan’s assessment is based on its own research and industry checks.
Meanwhile, Broadcom, which competes with Nvidia in the GPU market by designing custom application-specific integrated circuits (ASICs) and AI accelerators for major technology companies such as Google, Meta and OpenAI, may also be gaining as Nvidia shares remain pressured due to CEO Jensen Huang’s admission of his relationship with Chinese businesswoman Alice Huang who US officials suspect to be a Chinese spy, leading to a probe by Nvidia into the matter.
Anthropic IPO adds to Broadcom’s growth prospects
Developments around Anthropic’s planned initial public offering have also strengthened the investment case for Broadcom.
Anthropic said in an updated filing on Tuesday that it plans to offer 825 million shares at a price range of $70 to $78 apiece.
The company filed its Form S-1 registration statement with the US Securities and Exchange Commission last month and plans to list on Nasdaq under the ticker ANT.
The filing has 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.
“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.”
Analysts see buying opportunity after sell-off
Institutional support has also emerged after Broadcom’s recent decline.
Aureus Asset Management’s Karen Firestone disclosed that she increased her stake in the company 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.
“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 said in a note, as reported by Reuters.
The brokerage recommended “buying the drop” and also identified Broadcom and Nvidia among semiconductor stocks offering investment opportunities.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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