Broadcom stock rises 2% after Morgan Stanley reiterates overweight

Broadcom shares rose 2% on Monday after Morgan Stanley reiterated an overweight rating on the company and highlighted Broadcom and Nvidia as preferred ways to gain exposure to the artificial intelligence infrastructure buildout.

Morgan Stanley projected roughly $120 billion in AI-related revenue for Broadcom by fiscal 2027, including about $80 billion tied to Google’s tensor processing units (TPUs). The firm expects TPU revenue to decline to about 60% of Broadcom’s AI business over time as other application-specific integrated circuit customers scale deployments.

On Broadcom’s role supplying Google’s TPUs, Morgan Stanley’s analysts expect the company to retain about 80% of Google’s TPU share over time. The research note included the line, “MediaTek participation is real, but not disruptive,” and warned that forecasts of large Broadcom market-share losses are premature.

The bank described the current memory cycle as atypical, writing, “This remains an unusual memory cycle, as data center strength is the only cause — which means that as we saw in April there are mixed signals elsewhere that may be a false flag.” Morgan Stanley added that memory demand is improving but does not offer the best risk-reward among its semiconductor coverage.

Morgan Stanley pointed to Broadcom’s existing high-bandwidth memory supply agreements and raised execution questions about MediaTek’s packaging approach. The firm’s Taiwan semiconductor team expects MediaTek to rely on chip-on-wafer-on-substrate (CoWoS) packaging for 2-nanometer TPU production, while embedded multi-die interconnect bridge (EMIB) packaging remains largely unproven at the scale Google would require.

The research note said those technical and supply-chain factors could limit MediaTek’s ability to deliver cost savings large enough to displace Broadcom at scale.

Separately, Broadcom extended a multi-year partnership with Apple through 2031 to expand collaboration on custom silicon products. Analysts estimate Apple represents about 20% of Broadcom’s annual revenue. Broadcom has supplied Apple with radio-frequency components and Wi-Fi and Bluetooth chips for years, and the 2031 agreement follows a 2023 deal to develop 5G RF components for Apple.

The stock’s 2% gain on Monday occurred alongside Morgan Stanley’s reaffirmation of its overweight rating and the firm’s AI revenue forecast, and after Broadcom announced the Apple partnership extension earlier this month.