Broadcom (AVGO:NYE) is a major player in the semiconductor industry and it faced a rocky start today with a significant drop in pre-market trading. Reports have emerged that Google (GOOGL:NSD) is contemplating ending its supplier relationship with Broadcom, particularly in the AI chip sector, possibly as soon as 2027. This issue originates from an ongoing pricing dispute, casting uncertainty over the future of their collaboration. It aims to internalize chip manufacturing, a decision that could carry substantial consequences for both companies and the semiconductor sector as a whole. In this article, we will examine the ramifications of this development on the AVGO stock forecast.
The Google-Broadcom Friction:
Reports indicate that Google considered ending its partnership with Broadcom this year due to pricing negotiations. The pricing dispute has strained their relationship and raised doubts about its future. While Google hasn’t made a final decision, it’s contemplating self-manufacturing AI chips as a strategic option.
Impact on Broadcom:
The potential separation could be a significant setback for AVGO stock. Broadcom’s recent statement about generative AI’s potential to account for over a quarter of its semiconductor revenue next year is significant. Now, Broadcom must either regain Google’s trust or find alternative ways to make up for the potential loss of a major client.
Fair Trade Commission Imposes Fine:
Broadcom faces additional troubles in South Korea, where the Fair Trade Commission (FTC) has imposed a provisional fine of around $14.3 million. This penalty arises from allegations that Broadcom imposed an unfair supply agreement on Samsung Electronics.
The sanction is prompted by a complaint filed by Qualcomm in 2021. The FTC’s investigation uncovered that in 2020, Broadcom imposed a challenging long-term contract on Samsung. This contract obligated Samsung to buy $760 million worth of chips between 2021 and 2023, with penalties for any shortfalls. The unfair terms of the agreement ultimately led to its termination in August 2021.
AVGO Stock Forecast:
Based on the AVGO stock forecast from 17 analysts, the average target price stands at USD 911.24. This value has an upside potential of +9.71%. The average analyst rating gains “Strong Buy.” Additionally, Stock Target Advisor’s analysts are “Slightly Bullish.” This analysis is driven by 11 positive signals and 5 negative signals.
Recent Performance:
At the close of the last trading session, the stock was valued at USD 830.57. This price has changed by -2.62% over the past week, +0.57% over the past month, and +68.45% over the last year.
Conclusion:
The uncertain fate of Broadcom’s partnership with Google and the looming possibility of Google taking chip manufacturing in-house casts a shadow of doubt over the semiconductor manufacturer’s future. Broadcom’s recent legal entanglement with the South Korean FTC further complicates its situation even more. However, analyst’s ratings presents a different picture for investors.
