Broadcom is a 'core AI winner,' even as MediaTek encroaches, Morgan Stanley says

Broadcom's AI ASIC (application-specific integrated circuit) business continues to grow due to a surge in demand for AI semiconductors. MediaTek's entry into Google-customized ASICs is expected to have a minimal impact on AVGO's market share (around 5%), and AVGO will maintain its defensive position due to its technological advantages (high performance, low power) and diversification of clients (such as MS and Meta). Reflecting Morgan Stanley's assessment of 'key AI winners,' AVGO's revenue share from AI chips is projected to grow rapidly from 40% in 2024 to over 50% in 2025.

Over the past three months, a range has formed between 1300 and 1350. There is a high possibility of breaking through 1400 around the earnings announcement season (July to August) to reflect AI chip demand. If the support level drops to 1250, it will present an additional buying opportunity.

1) Increase in AI server demand: The demand for AI chips for data centers is expected to experience explosive growth starting in the second half of 2024. 2) Custom AI ASIC chips: The demand for AI chips from big tech companies like Google and Meta is expected to concentrate on AVGO's core products (P4, Tomahawk series). 3) Threat from MediaTek: MediaTek's entry into custom ASICs for Google may pose some threat to AVGO's monopolistic position in the AI ASIC market; however, AVGO's technological prowess and customer network create high entry barriers. 4) Continued investment in AI infrastructure: The demand for data center expansion driven by increased AI workloads will support AVGO's performance.