Last week, chip company Broadcom (AVGO) announced an agreement to produce future versions of artificial intelligence (AI) chips for Alphabet-owned Google (GOOGL). AVGO also signed an expanded deal with Anthropic that will give the AI startup access to about 3.5 gigawatts worth of computing capacity, backed by Google’s TPUs (Tensor Processing Units). On Monday, top UBS analyst Timothy Arcuri reiterated a Buy rating on Broadcom stock with a price target of $475 (26% upside potential), reacting positively to the company’s latest deals.
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The analyst raised his revenue estimates to reflect the latest deals.
UBS Analyst Weighs in on Broadcom’s Latest Deals
Arcuri noted that Broadcom’s new long-term agreement with Google extends through 2031, covering future generations of TPUs alongside a supply assurance agreement for networking and other critical rack-level components. The 5-star analyst thinks that this deal addresses, to some extent, a major investor concern about Google’s potential shift away from Broadcom, especially as MediaTek increases TPU volumes this year.
Regarding the expanded collaboration between Broadcom, Google, and Anthropic, Arcuri noted that this deal now boosts Anthropic-related TPU revenue from about $40 billion in calendar years 2026 and 2027 to about $50 billion.
While these new deals ease near-term concerns, Arcuri still expects investors to focus on Broadcom’s ASIC diversification beyond TPUs to de-risk the longer-term concerns about Google’s transition from a collaborative partner to a COT (Customer Owned Tooling) relationship with AVGO, especially as MediaTek ramps up.
Meanwhile, based on supply chain checks, Arcuri expects Broadcom to ship about 7 million TPUs in calendar year 2027, up from his prior estimate of about 6 million. He now projects AVGO to deliver revenue of $195 billion and $212 billion in Fiscal 2027 and calendar year 2027, respectively, up from his prior estimates of $182 billion and $195 billion. Also, he raised his Fiscal 2027 AI revenue estimate to $145 billion from $133 billion, significantly above the company’s guidance.
Is AVGO a Good Stock to Buy Now?
Overall, Wall Street has a Strong Buy consensus rating on Broadcom stock based on 27 Buys and four Holds. The average AVGO stock price target of $464.32 indicates 22.3% upside potential. AVGO stock has risen about 10% year-to-date.
