Key Takeaways
- Jay Goldberg at Seaport Research moved AVGO from Buy to Neutral, pointing to AI sector financial pressures
- A regulatory disclosure hints Broadcom might participate in financing an Anthropic data center project
- Among 53 FactSet-tracked analysts, only 3 maintain neutral positions on the semiconductor stock
- Broadcom revealed partnerships with Google and Anthropic in recent announcements this week
- The Google partnership extends through 2031, encompassing TPU development and AI infrastructure components
Following major partnership announcements with Google and Anthropic, Broadcom saw its shares surge 6% on Tuesday. Wall Street responded enthusiastically to the news. However, Jay Goldberg at Seaport Research took a closer look at the details and reached a different conclusion.
Goldberg downgraded his stance on Broadcom to Neutral after holding a Buy recommendation, positioning himself against the prevailing sentiment. Among the 53 sell-side analysts monitored by FactSet, only three maintain neutral-equivalent positions on AVGO. The remaining 50 analysts continue recommending the stock positively.
Goldberg’s reasoning centers on factors beyond operational performance. He acknowledges Broadcom’s business remains robust. The semiconductor giant expects to achieve approximately 60% revenue growth this year, fueled by robust demand for custom ASIC chips from major clients including Google and Anthropic. Business fundamentals remain strong.
What caught Goldberg’s attention was a specific disclosure within a Broadcom regulatory document. The filing revealed that Anthropic will obtain access to approximately 3.5 gigawatts of computing power via Broadcom. Additionally, the document mentioned that “the parties are in discussions with certain operational and financial partners” related to this infrastructure rollout.
This language led Goldberg to interpret the arrangement as a potential indication of Broadcom’s involvement in funding Anthropic’s data center construction. “The extent to which all the leading chip vendors are having to provide funding and/or backstops to their customers points to the industry’s strain,” he noted in his analysis.
Broadcom and Anthropic did not immediately respond to comment requests.
Semiconductor Giants Face Infrastructure Funding Pressures
Goldberg’s analysis extends beyond Broadcom alone. He argues that Broadcom, Nvidia (NVDA), and AMD (AMD) face a common challenge. Gigawatt-scale data facilities require massive capital investments, and chip vendors increasingly find themselves drawn into the financial arrangements backing these projects.
According to Goldberg, while Broadcom’s exposure appears more limited compared to Nvidia’s participation, the situation nonetheless reveals an industry grappling with the unprecedented capital requirements of AI infrastructure expansion.
The Google partnership, unveiled this week, involves Broadcom collaborating on tensor processing unit advancement through 2031. Additionally, Broadcom will deliver networking hardware for Google AI racks throughout this extended timeframe.
Goldberg noted that Taiwan-based MediaTek might capture a portion of the TPU market this year — likely insufficient to significantly impact Broadcom’s growth path, but possibly enough to provide Google with additional supplier options during negotiations.
Stock Price Reflects Current Success
Goldberg’s core thesis remains clear: Broadcom continues performing well operationally, yet the stock price already captures this performance. “We see its gains as fully factored into consensus now,” he stated in his research note.
AVGO shares have climbed 114% during the trailing 12-month period. The stock jumped 6% on Tuesday after the partnership reveals and added roughly 4% in Wednesday’s premarket session, supported by broader market optimism following news regarding a potential Iran cease-fire agreement.
