On Tuesday, Broadcom (AVGO) stock rose more than 5% after announcing expanded deals with Alphabet-owned Google (GOOGL) and AI start-up Anthropic. The chip giant will develop and supply custom TPUs (Tensor Processing Units) and networking components to Google. Under the deal with Anthropic, Broadcom will supply 3.5 gigawatts of TPU-based computing power.
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Jefferies analyst Blayne Curtis reiterated a Buy rating on AVGO stock with a price target of $500 (51% upside potential) following the announcement of the deals. Curtis said, “Overall, a strong endorsement of AVGO’s positioning at Google gives us further confidence in our $25+ of EPS scenario in C27.”
Jefferies Weighs in on Broadcom’s Expanded Deals with Google, Anthropic
Curtis noted that Broadcom’s long-term agreement with Google through 2031 and the updated Anthropic deal would ensure continued TPU demand for the foreseeable future. Even though it is not officially quantified, the 5-star analyst believes that the long-term agreement with Google guarantees Broadcom a minimum revenue (likely in the range of $200 billion), implying solid, sustained market share.
The analyst said that he has long been doubtful about the COT (customer-owned tooling) narrative and hopes that the duration of this updated agreement with Google addresses such concerns.
Also, Curtis noted that Taiwan-based MediaTek has likely delayed its v8x chip again, so it may not bring in any revenue this year. He added that although the TPU long-term agreement only includes the current 3.5 gigawatts Anthropic deal, there is scope for further expansion with Anthropic as well as other external customers.
Is AVGO Stock a Buy, Sell, or Hold?
Given the AI-led demand tailwinds, Wall Street has a Strong Buy consensus rating on Broadcom stock based on 27 Buys and three Holds. The average AVGO stock price target of $465.55 indicates 40.3% upside potential. AVGO stock is down 4% year-to-date but has rallied 115% over the past year.
