Broadcom (AVGO) Stock; Rebounds After Meta Chooses AMD for AI Deal

TLDRs;

• Broadcom shares climb 2% as Nvidia’s strong outlook boosts AI chip sector confidence.
• Meta’s $60B deal with AMD briefly pressures Broadcom shares but does not derail momentum.
• Analysts highlight software contract renewals as a potential risk for future Broadcom performance.
• Broadcom’s high-end networking and custom silicon remain key drivers of data-center growth.

Broadcom (AVGO) shares rebounded Wednesday, rising 2.1% to close at $332.31, with a further 0.4% gain in after-hours trading. The uptick comes after a brief dip earlier in the week, triggered by news that Meta Platforms selected AMD as a partner for a major custom AI chip initiative valued at up to $60 billion. Investors, however, drew confidence from Nvidia’s optimistic guidance, which helped lift sentiment across the AI chip sector.

The recovery highlights Broadcom’s resilience in the face of shifting hyperscaler supply agreements. Analysts are now closely watching which companies will dominate the next phase of data-center expansion and how strategic deals are structured. Broadcom’s blend of high-performance networking hardware and custom silicon positions the company as a crucial player in this evolving landscape.

Nvidia Outlook Supports Sector Momentum

Nvidia’s strong financial outlook has cast a positive light on the semiconductor sector, particularly AI-focused hardware providers. The company beat revenue expectations and saw its stock rise roughly 3% in after-hours trading, sparking renewed investor interest in related chipmakers. Broadcom benefited from this wave of optimism, as traders view Nvidia’s momentum as a signal for broader AI hardware demand.

Broadcom Inc., AVGO

“The AI hardware narrative is keeping investors engaged across the sector,” said industry analyst Gil Luria of D.A. Davidson. “Even though Meta chose AMD, Broadcom remains central to high-end data-center infrastructure.”

Meta-AMD Deal Shakes Market

Broadcom shares had dropped about 2% the previous day after reports confirmed that Meta secured a warrant to acquire up to 10% of a new AMD division developing AI chips. Meta’s infrastructure chief, Santosh Janardhan, emphasized that all major chipmakers are “at the table,” reflecting the competitive and fluid nature of enterprise AI supply agreements.

Despite the initial negative sentiment, the market appears to have quickly factored in the impact, with Broadcom rebounding as traders focus on long-term growth potential rather than single deals. Analysts stress that while custom AI silicon is competitive, Broadcom’s diverse portfolio and software offerings provide a buffer against short-term pressures.

Analysts Monitor Software Contract Risks

While hardware remains a strong growth driver, Broadcom’s software segment has raised some concerns. UBS analysts point to upcoming VMware contract renewals in 2026 and 2027, highlighting potential customer churn as a risk factor. TD Cowen adjusted its price target to $405 from $450, noting that while Broadcom’s stock valuation has softened, its AI infrastructure prospects remain promising.

Meanwhile, Broadcom’s VMware division recently issued a high-severity security advisory for Aria Operations, addressing three critical vulnerabilities. Patches and mitigations have been applied, underscoring the company’s ongoing operational vigilance.

Looking Ahead: Earnings and Market Catalysts

Investors are now turning their attention to Broadcom’s upcoming quarterly earnings report scheduled for March 4, followed by a conference call at 5 p.m. ET. Market participants will likely watch for updates on AI infrastructure projects, software contract renewals, and the company’s positioning amid ongoing hyperscaler shifts.

As the broader semiconductor sector continues to gain traction from AI demand, Broadcom appears poised to navigate both the opportunities and challenges ahead, balancing its custom silicon and software growth while weathering competitive pressures from AMD and other chipmakers.

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