Broadcom (AVGO) was up 2.85% on Tuesday after Morgan Stanley pushed back on growing fears that MediaTek is poised to eat into Broadcom’s dominant position supplying Google’s tensor processing units (TPUs).
Analyst Joseph Moore reiterated an Overweight rating and kept his $502 price target in place. He told clients the stock’s underperformance year-to-date has been somewhat surprising given how strong Broadcom’s AI growth has been.
“We think there are a few reasons for the weakness,” Moore wrote, pointing to investors favouring faster-growing AI semiconductor names. But the biggest drag, he said, is the ongoing debate around MediaTek versus Broadcom on Google TPU supply.
His take: the market is getting this one wrong.
Moore acknowledged that MediaTek does have a real opportunity — Google has both cost pressures and a desire to avoid over-reliance on a single supplier. That’s a legitimate business reason to bring MediaTek in for some 3nm design work.
But Moore doesn’t see that translating into major share losses for Broadcom.
Morgan Stanley’s base case is that Broadcom holds roughly 80% of Google’s TPU supply over time. Moore compared the current situation to last year’s Marvell/Alchip dynamic on Amazon’s Trainium chip, where fears of full displacement also turned out to be overblown.
“We do not agree with the supply-chain framework that implies a rapid move toward Broadcom share loss,” Moore wrote. He noted that MediaTek’s own publicly stated long-term goal is just 15-20% share — not a takeover.
There are also practical hurdles for MediaTek. Morgan Stanley’s Taiwan semiconductor team flagged that MediaTek still needs CoWoS packaging capacity for 2nm TPU production, and its EMIB packaging technology hasn’t been proven at the scale Google requires. That’s not a small problem to solve.
Broadcom also has a supply advantage that’s hard to replicate quickly. It has already locked in HBM memory supply under existing contracts, which makes any cost savings MediaTek might offer difficult to actually realise.
Morgan Stanley estimates Broadcom will generate around $120 billion in AI revenue in fiscal 2027. TPU-related revenue is expected to account for roughly $80 billion of that, though the firm expects TPU’s share of total AI revenue to drift lower to around 60% as newer ASIC customers come online.
Moore said Broadcom has “multiple” new ASIC customers expected to ramp in the second half of 2027, which adds another layer of growth beyond Google.
The firm called AVGO “a close #2 behind NVIDIA” and one of its preferred AI compute names, citing Broadcom’s custom ASIC leadership, networking franchise, and growing revenue diversification.
NVDA was up 3.79% on Tuesday. GOOGL gained 1.22%. MediaTek’s Taiwan-listed stock (2454.TW) dropped 4.31%.
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