Since the start of the tariff war, investors have been nervous about microchip stocks. That feeling wasn't much in evidence with Broadcom (AVGO 1.50%) on Monday, however, as the company's shares added 3% in value that trading session. A confident and bullish analyst note helped boost sentiment, and power Broadcom to a win over the S&P 500's (^GSPC 0.28%) 0.4% daily gain.
Optimistic about the chip sector
That note -- a weekly update on leading semiconductor titles -- was published by white-shoe investment bank Morgan Stanley Monday morning. It covered several notable chip stocks, and although this week's edition mainly focused on the sector's current darling Nvidia, it also addressed cutting-edge companies Broadcom and Marvell.
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According to reports, Morgan Stanley feels demand for Nvidia's suite of products remains strong, and will continue to be notably higher than supply. Digesting this, investors clearly extrapolated this to be a benefit for the wider market for advanced chips, such as those that can power artificial intelligence (AI) functionalities.
The investment bank added that a recent tailwind, inventory buildup arising from component delivery hiccups, should be short-lived. Once this abates, the market is likely to recover quite speedily.
In the note, Morgan Stanley said that it believes Broadcom will post solid results when it reports its second quarter of fiscal 2025 figures after market close this Thursday, June 5.
The high expectations of professional bulls
The bank isn't the only researcher expecting a good second-quarter showing from Broadcom. Collectively, analysts tracking the stock are anticipating nearly 43% year-over-year growth in per-share earnings (to $1.57), on the back of a 19%-plus improvement in revenue to almost $15 billion for the period. Given its admirably wide range of next-generation offerings, I'd fully expect meaty growth, too.
