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Broadcom Share Price Takes A Hit After EU Regulatory Headwinds

Broadcom share price declined on Monday by 2.48% to close at $1310.69. The share price has been in a whipshaw for the most part of the last month, as investors react to the EU regulator’s implications of VMware acquisition.  Broadcom (Nasdaq: AVGO) acquired VMware, a full-stack computing company in November 2023 for $69 billion. The company has also faced headwinds in Europe after the EU antitrust regulators sought responses regarding changes to terms of licensing. 

The complaints have been received from user groups in Germany, Belgium, the Netherlands and France. Some of the issues in contention include price hikes, refusal to renew security protections for perpetual licenses, a ban on reselling licenses and re-bundling of licenses.  Perpetual license holders are especially concerned about how they will be treated going forward, as there are indications show that they will miss out on key services offered on the subscription packages.

The Eurozone has one of the most stringent regulations and consumer protection laws, and major tech companies like Google, Apple and Facebook have paid heavy fines in the past for flouting rules.  Company CEO came out this week to clarify the implications of the licensing terms, but the EU’s competition watchdog is unlikely to let this slide.

VMware will be central to Broadcom’s growth prospects in 2024, considering that it brought in $2.1 billion in revenue between November 2023-February 2024. Therefore, trouble in Europe could bring downward pressure on Broadcom share price in the coming weeks.  

Despite the current turbulence, the company expects AI to contribute 35% of its revenue in 2024. At the forefront of this is the high demand for its AI-optimized custom accelerators and AI-related networking equipment.

Technical analysis

The RSI indicator on the Broadcom share price shows that the sellers are in control. The downside will prevail as long as resistance remains at the 1330.51 pivot mark. With the sellers in control, they will likely breach the support at 1314.56. A continuation of seller control at that level could lead to further declines to test 1300.73. On the other hand, a move above 1330.51 will favour the buyers to take control, with the next resistance coming in at 1347.53. A move beyond that point could build an upward momentum to test 1361.89.