Broadcom (NASDAQ:AVGO) CEO Hock Tan put an end to swirling merger and acquisition (M&A) speculation this week, dashing hopes among Intel (NASDAQ:INTC) investors who were banking on a potential deal to revitalize the struggling chip giant.
Broadcom’s Focus on AI and VMware
During Broadcom’s Q1 FY25 earnings call, an analyst questioned Tan about his company’s potential acquisition interest in Intel. Tan’s response was clear and direct: “We’re not thinking of it at this point. I’m too busy — we’re too busy doing AI and VMware at this point.”
This statement immediately dispelled rumors that had gained traction in recent months, linking Broadcom to a possible acquisition of Intel’s chip design and marketing business. With Broadcom focusing its efforts on artificial intelligence (AI) and its recent VMware acquisition, it appears the company has no intention of making a move on Intel in the near future.
Intel Shares React to the News
Following Tan’s comments, Intel shares extended their five-day losing streak, as investor sentiment took a hit. However, the broader Wall Street reaction was relatively muted, likely due to skepticism surrounding the feasibility of an Intel-Broadcom deal from the start.
Last month, reports from The Wall Street Journal reignited speculation that Broadcom was closely evaluating Intel’s chip design and marketing business as part of a potential acquisition. This news initially lifted Intel’s stock, as investors saw an opportunity for the beleaguered semiconductor giant to regain its competitive footing.
Wall Street Analysts Remain Cautious
Despite the brief optimism, analysts urged caution over the rumored deal. SA author Uttam Dey maintained a Hold rating on Intel, emphasizing regulatory challenges and the early-stage nature of the discussions. Kenio Fontes echoed similar sentiments, stating that while M&A could unlock value, the ultimate outcome would depend on deal structure, regulatory hurdles, and execution risks.
With Broadcom officially ruling out an acquisition at this time, Intel is left to chart its own course forward. While the company remains a significant player in the semiconductor space, it must navigate a challenging landscape without the potential support of a Broadcom-led turnaround.
Truist Raises Price Target for Broadcom Amid AI-Driven Growth
In a bullish development for Broadcom, Truist has raised its price target on the company’s stock from $260 to $267 while maintaining a Buy rating. The move comes on the heels of Broadcom’s strong Q1 performance, with upside surprises in its earnings results.
The company’s Q2 guidance is being driven not just by its software division but predominantly by AI, which has more than offset any weakness in Broadcom’s legacy semiconductor markets. Analysts at Truist highlighted that Broadcom’s AI momentum remains a powerful growth catalyst.
Notably, Broadcom’s management emphasized the presence of four “pre-customers” that could propel annual sales growth to a staggering 30% or higher. This revelation underscores Broadcom’s position as a leader in AI infrastructure, setting the stage for continued robust expansion.
With AI playing an increasingly crucial role in Broadcom’s revenue streams, investors remain optimistic about the company’s long-term trajectory, even as the broader semiconductor industry faces pockets of weakness. As AI adoption accelerates, Broadcom’s ability to capitalize on these trends could drive significant shareholder value in the years ahead.
