Key Takeaways
- Rothschild & Co Redburn downgraded Broadcom to Neutral from Buy on Nov. 13 and cut its price target to $398 from $595, 9% above the Nov. 12 close of $364.36.
- The firm’s worry is that Broadcom relies on Anthropic and OpenAI, two labs it’s helping to pay for its chips, and that Alphabet’s Google may do more of its own chip work.
- Analysts’ consensus target is $533, 46% above that close, and their fiscal 2027 earnings estimate is $19.47 a share, against $19.58 three months ago.
- At 12x the earnings analysts expect for fiscal 2028, Broadcom already trades at a steep discount for the risk Redburn names, so the downgrade looks late.
Rothschild & Co Redburn downgraded Broadcom (AVGO) to Neutral from Buy on Nov. 13 and cut its price target to $398 from $595. That’s 9% above the Nov. 12 close of $364.36, which already sat 24% below the stock’s June 2 closing high.
Redburn’s worry is Broadcom’s reliance on Anthropic and OpenAI, and whether Alphabet (GOOGL) keeps Google’s chip work with Broadcom.
Broadcom Is on the Hook for Its Biggest Customers
Broadcom expects Anthropic to become its largest custom-chip customer in 2027, and OpenAI its second-largest in 2028. And it’s helping Anthropic pay: it backstops up to about $29 billion of leases in an earlier Anthropic financing, and a filing last month put a maximum of about $43 billion on its support for a second, $63 billion one.
Broadcom calls a payout unlikely, and the two maximums may never peak at the same time. Still, up to about $72 billion combined is a lot of support to put behind Anthropic when the company held $24.0 billion of cash on Aug. 2.
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Redburn Wants Proof, and It Won’t Come Fast
Redburn’s Mike Harrison said guidance puts Broadcom at about 11x fiscal 2028 earnings, but questioned the quality and durability of those earnings. The firm wants to see the two labs stay ahead of open models and pay their own way quickly, and Google’s push to do more of its own chip work stay contained. It expects that to take time.
Alphabet has given Broadcom some cover there: Broadcom’s supply deal for the networking in Google’s next-generation AI racks runs through 2031.
Does $398 Sell Broadcom Short?
Analysts have raised their consensus target from $394 a year ago to $533, 46% above the Nov. 12 close. Before Redburn’s call, the lowest target on the Street was $400.
Analysts expect normalized EPS of $19.47 for fiscal 2027 and $30.37 for fiscal 2028:
Three months ago, the fiscal 2027 estimate was $19.58, so the numbers have held up. Broadcom trades at 21x forward earnings, below its 5-year average of 24x, though that average includes a 49x peak in December 2025:
On consensus estimates, today’s price is 18.7x fiscal 2027 earnings and 12.0x fiscal 2028 earnings. Redburn’s $398 is a price for a year from now, so the fair comparison is 13.1x fiscal 2028 consensus against today’s 18.7x on fiscal 2027.
Broadcom Already Trades at a Discount
If Anthropic stumbles, Broadcom could lose its fastest growth and pay out on its guarantees in the same year. I think Redburn is right about the risk and late on the stock: at 12x the fiscal 2028 consensus, the market is already discounting a lot of that doubt.
The next test is Broadcom’s fourth-quarter report on Dec. 9. If management sticks with its outlook of about $115 billion of AI revenue for fiscal 2027, a Neutral rating will look too cautious.
So What Is Broadcom Stock Actually Worth?
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