Broadcom Confronts Margin and China Risks as TD Cowen Cuts Price Target

Overview

• TD Cowen lowered its Broadcom price target to $405 from $450 but kept a Buy rating, citing rising AI infrastructure spending that it expects to support 2026–2027 semiconductor estimates after a valuation pullback.
• Forbes highlights a potential VMware backlash, pointing to reported steep price increases, a Tesco lawsuit alleging contract breaches, and a challenge from European cloud providers, with Gartner projecting market share could drop from 70% to 40% by 2029.
• Management has signaled near‑term profitability pressure from a heavier mix of lower‑margin custom AI accelerators, a factor that contributed to a post‑earnings sell‑off despite strong recent results.
• AI chip revenue reached $20 billion in fiscal 2025, or 31% of total sales, and company guidance cites a possible $60 billion to $90 billion annually by fiscal 2027.
• Forbes also flags geopolitical exposure, noting China’s directive to phase out foreign software including VMware by mid‑2026 and new 25% U.S. tariffs on advanced AI chip exports to China, posing risks to revenue with significant China ties.