Broadcom Sinks 7% as Rothschild Redburn Downgrade Slashes Target to $398: “Unlikely to Occur Quickly”

Key Takeaways

• Broadcom fell 7% today after Rothschild & Co Redburn cut it to Neutral and lowered its target to $398 from $595.
• Redburn says Broadcom’s AI growth depends on Anthropic and OpenAI paying their own way, and doesn’t expect that quickly.
• Cerebras also depends on OpenAI, and Broadcom is helping finance Anthropic.
• The risk is real, but Broadcom’s forward P/E is already below its five-year average.

Broadcom (AVGO) sank 7% today after Rothschild & Co Redburn downgraded the stock to Neutral from Buy and cut its price target by a third, to $398 from $595.

Cerebras Systems (CBRS) rose 6% today on a quarter that beat its guidance, but it has the same problem Redburn flagged: OpenAI.

It all comes down to two labs

Redburn said Broadcom’s alignment with Anthropic and OpenAI means the frontier labs “need to establish sustained primacy over open models and become self-financing in short order.” It added that the upside from “clearing these…