Broadcom has been rated as a 'Hold' due to several risk factors that temper its strong AI-driven growth.
Analysts point to potential margin pressure, noting that the company’s booming AI products carry lower margins. Management guides for a 1% sequential decline in consolidated gross margin for Q1'26, reflecting the higher mix of this AI revenue.
The company also faces execution risks associated with its new Singapore packaging facility. This strategic move to in-source part of the supply chain could introduce higher costs.
Additionally, intensifying competition from Marvell’s photonic technology threatens Broadcom’s market share in the networking business. Non-AI segments are projected to see flat growth.