Key Morningstar Metrics for Broadcom
- : USD 500Fair Value Estimate
- : ★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
Broadcom AVGO announced a multiyear partnership with Meta Platforms for its custom MTIA XPU chips. The partnership includes one gigawatt as the start of a multigigawatt buildout that encompasses XPUs, networking, and optical chips. No timeline was provided.
Why it matters: The partnership aligns with our bullish XPU growth expectations for Broadcom through 2030. We believe XPUs are a critical complement to GPUs for large-scale inference customers pursuing better cost, better performance, and reduced vendor lock-in.
- We see this as an official publication of an existing partnership. Broadcom has already been Meta’s MTIA partner for chip design, and Meta has been aggressively expanding its MTIA roadmap. This follows the public announcements from Anthropic and Google, with Broadcom announcing a week earlier.
- We project about 1 GW of MTIA capacity to ship through 2028 for Meta. This announcement likely indicates some upside to our short-term forecasts. Still, we look forward to hearing more specifics about the timing of shipments and how much of this is incremental.
The bottom line: We maintain our USD 500 fair value estimate for wide-moat Broadcom, one of our top picks in the semis space. The announcement directionally agrees with our bullish XPU growth forecast, which underpins our call on the stock. Shares rose about 4% after hours, leaving them 20% below our valuation.
- Our XPU bullishness is the majority of our bullishness on Broadcom. We need to see 35% annualized earnings growth for the firm over the next five years to justify our valuation. This is led by our forecast for 75% five-year annualized XPU revenue growth through 2030.
- MTIAs are a minority of our Broadcom XPU forecast, which is dominated by external-facing model builders like Google, Anthropic, and OpenAI. Still, we see Meta as a key fourth customer, and the announcement potentially signals a larger opportunity down the road than we currently expect.
