Shares in U.S. chipmaker Broadcom (AVGO) dropped today as it scrapped plans to invest in a $1 billion plant in Spain.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
Talks Crumble
According to a Reuters report, talks between the Spanish Digital Transformation Ministry and Broadcom over the deal have broken down.
The deal was first announced in 2023 when Broadcom said it was taking advantage of the PERTE Chip program launched by the Spanish Government. It aimed to strengthen the production capacities of the Spanish industry of microelectronics and semiconductors.
Broadcom did not say at the time how much it was looking to invest, but the government said the project could be worth $1 billion. It had hoped to create “large-scale back-end semiconductor facilities unique in Europe.”Broadcom was also likely to boost its European business which currently, in revenue terms, trails other areas of the world.
Trump Obstacle
According to local press in Spain, the breakdown has been caused by the “inaction” of the government as well as concerns, from Broadcom’s side, around President Trump’s opposition to U.S. semiconductor companies investing abroad.
Indeed, it went further, claiming that Trump has obstructed the Broadcom investment in Spain as well as “another joint-venture with another American company, which was also going to make chips in Spain.”
Further complicating the issue is the threat from Trump to impose huge 30% tariffs on imports from the European Union from 1 August. This could lead to a sharp reduction in trade between the US and EU and a deterioration in relationships.
Another issue Broadcom could be wrestling with is the increasingly forceful manner in which the EU is treating U.S. tech through the Digital Markets Act and the AI Act.
Neither Broadcom nor the Spanish government has made any comments on the future of the factory.
Is AVGO a Good Stock to Buy Now?
On TipRanks, AVGO has a Strong Buy consensus based on 28 Buy and 2 Hold ratings. Its highest price target is $400. AVGO stock’s consensus price target is $299.23 implying a 9.06% upside.
