Morgan Stanley on Tuesday reaffirmed an Overweight rating on Broadcom, signaling confidence in the chipmaker's position in cloud AI hardware despite investor concerns that MediaTek could take a large chunk of Google's TPU business.
Analyst Joseph Moore told investors that Morgan Stanley expects Broadcom to retain roughly 80% TPU share over time, calling bearish forecasts of 50% share or eventual displacement "premature." The firm said "MediaTek participation is real, but not disruptive," drawing a parallel to last years Marvell/Alchip situation around Amazons Trainium chip, where fears of total displacement similarly proved exaggerated.
Morgan Stanley acknowledged that MediaTek presents a credible threat in the context of Googles cost-conscious procurement and desire for multiple suppliers. Still, the bank argued that meaningful cost savings may be hard to achieve in practice, particularly with respect to high-bandwidth memory (HBM). The note states Broadcom has already secured HBM supply under existing contracts, which could blunt MediaTeks potential advantages on component costs.
The firm also highlighted execution risk tied to MediaTeks packaging approach. Morgan Stanley reported its Taiwan semiconductor team expects MediaTek to rely on CoWoS capacity for 2nm TPU production, and warned that EMIB packaging technology remains unproven at the scale Google requires.
On the revenue outlook, Morgan Stanley estimated Broadcom will generate roughly $120 billion in AI revenue in fiscal 2027, with TPU-related revenue around $80 billion. The note also forecasted that TPUs portion of total AI revenue would decline to about 60% as newer ASIC customers ramp production.
Morgan Stanley framed Broadcom as a leading AI compute name and one of its preferred semiconductor growth stories. In the research note the firm said, "AVGO remains one of our preferred AI compute names and a close #2 behind NVIDIA." The firm added: "We view Broadcom as one of the best growth stories in semis, supported by its leadership in custom ASICs, strong networking franchise, increasing AI revenue diversification, and a management team we trust to execute through product transitions."
Implications for markets and sectors
- Semiconductor sector - The note supports the view that Broadcom will remain a dominant supplier for large-scale TPU deployments.
- Cloud infrastructure and hyperscalers - Google's TPU sourcing dynamics and supplier optionality are central to the debate.
- AI compute supply chain - HBM memory contracts and packaging technologies are key operational levers that affect competitive positioning.