Broadcom Stock Rebound and Why $400 Support Isn’t Farfetched

Broadcom stock (NASDAQ: AVGO) experienced a challenging period starting in early June, struggling to consistently trade above the $400 mark. However, sentiment appears to be shifting based on recent trading activity.

The stock saw a rise of nearly 2% on Monday, followed by an additional 2.2% increase in Tuesday’s pre-market trading, with shares nearing $390. This report explores the factors influencing this recent upturn and what investors might anticipate in the coming weeks, including potential challenges.

What Is Behind the Recent Rebound?

Broadcom stock’s recent momentum largely stems from Wall Street analysts’ strong vote of confidence, which has eased persistent fears about the company losing market share in custom AI silicon. Morgan Stanley, for instance, believes Broadcom offers the best risk-reward in AI infrastructure. They forecast that the will maintain roughly 80% of Google’s TPU share, with improving memory tailwinds and an Apple deal stretching to 2031 adding long-term revenue visibility.

In a recent research update, Morgan Stanley maintained its “Overweight” rating for Broadcom, identifying it alongside Nvidia as a preferred investment for exposure to the growing AI infrastructure market. Importantly, the firm addressed investor concerns regarding MediaTek potentially capturing business related to Google’s custom Tensor Processing Units (TPU).

While MediaTek’s involvement is real, Morgan Stanley clarified that Broadcom is projected to keep roughly 80% of Google’s TPU supply because competitors face technical execution hurdles. This offers meaningful reassurance to investors who worried Broadcom might lose ground as hyperscalers diversify their custom-silicon suppliers.

Additionally, developments in Broadcom’s infrastructure software segment also looks strong, especially with VMware. The recent VMware Cloud Foundation 9.1 release targets production AI workloads in private clouds. It meets enterprise needs for security, cost efficiency, and scalability.

As companies move their AI deployments beyond initial testing phases, this positions Broadcom to capitalize on demand for both its hardware and software solutions. Furthermore, Broadcom’s upward movement is not occurring in isolation. The broader market environment has been supportive, with the Nasdaq Composite Index increasing by 0.8% and the S&P 500 Index gaining 0.4% during the same trading session. That reflects a broader positive investor sentiment towards technology and growth-oriented companies.

What to Expect in the Coming Weeks

In the near term, a key technical indicator will be Broadcom stock’s ability to reclaim and sustain trading above the $400 level. A decisive move above this price point would signal the conclusion of the post-earnings adjustment period and could open the way towards the average analyst price targets, which are currently ranging between $510 and $520.

While two consecutive days of gains might suggest a trend reversal, the sustainability of this upward momentum largely depends on the company’s operational performance aligning with current expectations.

Management’s guidance anticipates over $16 billion in AI semiconductor revenue for the third quarter, which will likely serve as a critical benchmark during Broadcom’s next earnings report. Until then, the current recovery appears to be driven more by market sentiment than by a confirmed shift to a new upward trend.

What Are the Risks?

Several factors call for caution. The stock’s valuation remains high after years of AI-fueled growth, leaving it vulnerable if big tech companies slow their capital spending. Analysts have warned that hyperscalers might face cash flow pressures by 2027, due to their massive AI infrastructure costs. There’s also the intensifying competition for custom AI chips and networking which could challenge Broadcom’s dominance.