Broadcom (AVGO) Seen Well Positioned as AI Spending Concerns Ease

Broadcom Inc. (NASDAQ:AVGO) is one of the 10 AI Stocks to Keep on Your Radar. On February 5, Jefferies analyst Blayne Curtis reiterated a Buy rating on the stock with a $500.00 price target. The firm has reiterated AVGO as its Top Pick, feeling confident that its fundamentals will drive outperformance.

Jefferies highlighted two overhangs for Broadcom, including the sustainability of AI spend and COT distribution. However, Google’s capital expenditure guidance has been a “significant vote of confidence” for increasing AI spending, and so is the capital raising progress from other players including OpenAI, xAI, and Oracle.

Addressing concerns about Broadcom’s custom on-package (COT) business, Jefferies noted that AVGO is well ahead of MediaTek on v8 chips and will be “even further ahead” with v9 chips in both timing and capabilities.

AVGO and MTK are working on two different SKUs (AVGO v8ax and MTK v8x) and we believe most, if not all, of the demand will be for the higher performance AVGO chip, similar to what happened with v6e vs v7x.

The firm’s bottom-up model projects 6 million total units for Google in calendar 2027, with 85-90% of that business going to Broadcom. It also sees room for that overall number to move up further.

Meanwhile, networking also continues to accelerate, likely even outpacing ASICs in the quarter supported by the TH6 ramp, DSP share gains, and China strength.

We reiterate AVGO as our Top Pick and expect the results will speak for themselves.

Broadcom is a technology company uniquely positioned for the AI revolution, thanks to its custom chip offerings and networking assets.

While we acknowledge the potential of AVGO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.