Here’s Why Goldman Sachs Says Buy Broadcom (AVGO) Stock, But Urges Caution on Marvell
AI Leadership, Strong Software Margins Put Broadcom in Pole Position
Goldman Sachs Bullish on Broadcom, Neutral on Marvell in AI Silicon Race
Goldman Sachs has launched fresh coverage of major U.S. semiconductor and EDA software stocks, giving a clear “Buy” signal on Broadcom (AVGO) while remaining cautious on Marvell Technology (MRVL). The bank’s outlook reflects confidence in companies tied to “the most sustainable elements of AI-related capital expenditure,” with Broadcom firmly leading that list.
- Goldman Sachs analyst James Schneider issued a Buy rating and a $315 price target for AVGO, expecting the company’s dominant position in enterprise networking silicon to power even stronger market share in custom AI chips for hyperscale customers.
- By 2026, AI is projected to represent over 40% of Broadcom’s revenue.
- AVGO is now viewed as the second “indispensable” AI supplier for U.S. hyperscalers, thanks to its differentiated technology and expanding communications portfolio.
What Sets Broadcom Apart?
- Strong core infrastructure software business: Broadcom continues to generate high and growing profitability from its infrastructure software division, giving it a competitive moat.
- Diverse software assets: The company’s breadth in software infrastructure strengthens its value to customers and enhances business resilience.
- Sole-sourcing advantage: Schneider highlights the “visibility provided by sole-sourcing at silicon accounts and the mission-critical nature of its software portfolio,” arguing this justifies a premium valuation.
- The $315 price target reflects a robust 35x P/E multiple, a vote of confidence in Broadcom’s steady growth and high-margin business mix.
Marvell Technology: Good, But Not Great?
- By contrast, Goldman Sachs assigned a Hold rating to Marvell (MRVL), citing only “moderate visibility” into its AI revenue ramp through 2026.
- While Marvell is recovering in its traditional business segments, the bank is more confident in Broadcom’s ability to deliver sustained AI-driven growth.
Broader Coverage: Who Else Made the Cut?
- Buy Ratings: Nvidia (NVDA), Cadence (CDNS), and Synopsys (SNPS) join Broadcom in Goldman’s bullish camp.
- Hold Ratings: Advanced Micro Devices (AMD) and ARM Holdings (ARM) received Hold ratings, signaling some reservations about their near-term upside.
Wall Street Consensus: Strong Buy for Broadcom
- Broadcom boasts a Strong Buy consensus, with 28 Buys and just two Holds from analysts.
- The average price target of $298.04 suggests around 7.3% upside from current levels, as Broadcom stock has already risen about 20% in 2024.
Key Takeaways
- Goldman Sachs favors Broadcom’s leadership in AI hardware and software, setting it apart from peers for sustained growth.
- The firm’s premium valuation for AVGO is driven by visibility in silicon and critical software roles.
- Marvell and others may see AI upside, but Goldman is clearest in its bullishness on Broadcom’s blend of scale, technology, and profits.
