Wall Street is piling into Broadcom stock (NASDAQ: AVGO) behind a month-old JPMorgan stock pick, and a $30 billion Apple deal has since made that call look smart.

The stock trades near $389, still about 21% below its 52-week high of $495, with its next earnings due September 2. Nearly every bank covering it says buy, yet one of its own executives just sold millions in shares.

Why AVGO Became a Top JPMorgan Stock Pick

The story starts in June. On June 17, JPMorgan analyst Harlan Sur told clients to be aggressive buyers at current levels, keeping an Overweight rating and a $580 target, roughly 49% above the recent price near $389, a CNBC report showed. Early June also saw Bank of America analyst Vivek Arya raising his target.

Sur argued the market underrated Broadcom’s long lead in custom AI chip design and advanced packaging. He pointed to its record with Google, which it has helped ship 14 advanced chips over 12 years.

Even then, the view was nearly unanimous. Of the 51 analysts covering the stock, 47 rated it a buy, sourced from the same CNBC report.

The Apple Deal and the Bank Pile-On

Then came the validation. On July 8, Apple committed more than $30 billion to Broadcom through 2031, a deal for over 15 billion US-made chips. Broadcom will also spend $1.5 billion to expand a Colorado plant to build them.

At its core sits custom ASIC silicon, the exact edge Sur had flagged. Those chips will help run Apple’s Baltra servers, the backbone of its cloud-based AI features.

So a month after the buy call, Apple backed the thesis. Broadcom now anchors the custom-chip plans of Apple, Google, and Meta at once.

Other banks quickly agreed. Bank of America now holds a ‘Buy’ on AVGO followed by JPMorgan and William Blair.

Then on July 14, Morgan Stanley’s Joseph Moore lifted his target to $502 and called Broadcom a close number two behind Nvidia, CNBC reported.

The Selloff That Opened the Door

The window existed because of a strange reaction. Broadcom posted record second-quarter revenue of $22.19 billion on June 3, up about 48% on the year, and beat on profit too. Yet the stock dropped after that record quarter, falling near 20% in a week.

The fear was margins, not growth. Gross margin is set to ease to about 74% from 77% as lower-margin AI chips take a bigger share.

Still, those AI sales jumped 143% to $10.8 billion, and guidance points to about $16 billion next quarter. That is the growth the bullish banks believe the selloff mispriced.

The Risk Sitting Inside

One signal cuts the other way. On July 8, the day the Apple deal landed, Chief Legal Officer Mark Brazeal sold 25,000 shares for about $9.48 million, trimming his stake by roughly 10%, an SEC filing showed. That left him with about 220,000 shares.

The tape is cautious too. Broadcom’s Chaikin Money Flow, a gauge of buying versus selling pressure, keeps drifting lower, and Erste Group cut it to hold on July 7.

Any sign of slowing hyperscaler AI spending could still sting. For now, the banks and the insiders disagree. The September 2 report will settle who was right.

Источник: BeInCrypto