Broadcom Shares Fall Following Analyst Downgrade Over AI Customer Financing Risks
Broadcom (AVGO) shares experienced a significant decline on Friday, dropping as much as 7.3% following a downgrade by Rothschild & Co Redburn analyst Mike Harrison. The analyst lowered the stock's price target from $595 to $398, citing concerns regarding Broadcom's heavy reliance on AI startups OpenAI and Anthropic. The primary concern involves Broadcom providing massive financing guarantees—up to $63 billion for Anthropic and $50 billion for OpenAI—to facilitate the purchase of custom chips (XPUs). While CEO Hock Tan views these guarantees as a strategic way to capture revenue from growing compute deployment, critics warn of potential risks associated with circular financing and the fact that these major customers are not yet self-sustaining.