Wall Street Big Banks collectively sing the praises of Broadcom Inc. (AVGO.US) - Morgan Stanley claims that its short-term turning point has arrived, and raises its target price to $462.

On Friday, Broadcom Inc. (AVGO.US) became the focus of Wall Street attention. The technology giant, which spans the software and semiconductor fields, received high praise from multiple investment banks after announcing its latest financial results and performance guidance. However, despite initially rising after the financial report was released, the stock price of Broadcom Inc. later gave back its gains as some investors were concerned about the company's potential future profit margin pressure. As of the time of writing, the stock plummeted over 10%, trading at $365. Morgan Stanley analyst Joseph Moore wrote in a report to clients that Broadcom Inc.'s performance this quarter was "very strong overall," and it was the first time in a while that the company showed short-term upside potential in its performance. He noted that the company has raised long-term expectations for each quarter in the natural year 2025, expanded its customer base from 3 to 5 companies, and set optimistic targets for the Serviceable Addressable Market (SAM) in 2027. With the positive progress related to TPU v7, Broadcom Inc.'s AI-related revenue continued to exceed expectations, despite this advantage being somewhat offset by the softness in non-AI semiconductor business. Moore also pointed out that this quarter's performance shows a more pronounced short-term inflection point, with the company's overall revenue and earnings per share guidance significantly higher than previously predicted, and the AI revenue guidance for the quarter in January exceeding expectations by about 20%. Based on this performance, Morgan Stanley maintained an "Overweight" rating for Broadcom Inc. and raised its target price from $443 to $462. However, Moore expressed caution regarding certain details. He mentioned that a significant order disclosed in the financial report was from Anthropic, which had placed orders worth about $10 billion with Broadcom Inc. and had additional orders of around $11 billion. These products are based on Alphabet Inc. Class C's TPU architecture, and according to statements made during the conference call, the sales related to Anthropic may involve sharing some profits with Alphabet Inc. Class C. More importantly, this type of full system rack sales model is likely to significantly lower Broadcom Inc.'s overall gross margin. Moore stated that the management had acknowledged that the gross margin for this business would be lower than the company's average level, but specific numbers had not been provided due to uncertainty. Morgan Stanley temporarily assumed a gross margin in the mid-40% range, but the actual results could be higher or lower than that level. He also noted that these orders involved significantly lower shipment volumes for revenue per unit compared to the model of selling accelerator cards to other cloud customers, thereby increasing the volatility of performance models. Furthermore, the repeatability of this business in 2027 remains unclear, especially in terms of whether Anthropic will continue placing orders. During the conference call, the company's management mentioned that the backlog of AI orders deliverable in the next 18 months was approximately $73 billion, implying some risk of revenue decline in the first half of 2027. However, Moore believed that the company still had the potential to receive new orders during this period. Despite the background of AI revenue exceeding $90 billion in the next 18 months, the growth space in the first half of 2027 might be relatively limited, and the company's outlook for growth in 2027 appeared slightly conservative compared to the previous financial report conference call. Jefferies Financial Group Inc. analyst Blayne Curtis also raised the target price of Broadcom Inc. after the financial report, believing that the company's AI story was still expanding. He mentioned that Anthropic had added around $11 billion in additional orders in the fourth quarter of the 2026 fiscal year, and external TPU-related business continued to progress. Additionally, the company signed its fifth unnamed customer this quarter and started a long-term custom XPU project, which potential customers may not be OpenAI and could be related to Apple Inc. Broadcom Inc. disclosed that the backlog of AI orders for the next six quarters was approximately $73 billion. Curtis also noted that some investors were worried that the data mentioned above did not fully reflect the upside potential in the 2026 fiscal year, but he believed that there was still a chance to continue receiving new orders in the second half of the year. He pointed out that there had been a shift in Broadcom Inc.'s communication strategy: while previously emphasizing long-term prospects when showing strong short-term performance, with the acceleration of the AI business, the management's guidance now focused more on the upcoming quarters. Wells Fargo & Company analyst Aaron Rakers also stated that Broadcom Inc.'s AI momentum was "accelerating," particularly highlighting the growth in the order backlog mentioned in the company's statements for the 2027 fiscal year. Based on this, Wells Fargo & Company raised Broadcom Inc.'s target price significantly from $345 to $410.