FB analysts: Apple–Broadcom deal reduces risks for the chipmaker

Freedom Broker experts believe that the long-term agreement between Apple (AAPL) and Broadcom (AVGO) worth more than $30 billion removes key uncertainty surrounding Broadcom’s business and confirms that the company will retain its status as Apple’s strategic supplier at least through 2031. In the experts’ view, the deal also shows that Apple continues to rely on partners as it develops its own AI infrastructure, rather than fully abandoning third-party solutions. Read more about the new agreement in Freedom Broker analysts’ biweekly review.

What you need to know about Apple and Broadcom

Apple is the world’s largest manufacturer of consumer electronics and the developer of its own ecosystem of devices and services. Broadcom is one of the world’s leading makers of semiconductor solutions for telecommunications, networking equipment, and data centers, and it remains one of the key suppliers of components for Apple devices.

Why the agreement matters to investors

According to Freedom Broker analysts, Apple and Broadcom entered into an agreement through 2031 to develop and manufacture specialized semiconductor solutions and wireless communication components for multiple generations of Apple devices. Total commitments exceed $30 billion, making the contract the largest under the Apple American Manufacturing Program. The document also предусматривает the production of more than 15 billion chips in the United States and the modernization of Broadcom’s manufacturing site in Fort Collins, Colorado, where the company will direct about $1.5 billion in investments.

For Broadcom, this contract removes one of the most significant risks of recent years—market concerns that Apple would gradually replace the company’s solutions with its own developments, as is already happening with Qualcomm (QCOM). In addition, for the first time the agreement explicitly mentions the development of custom semiconductor solutions, which, Freedom Broker analysts believe, confirms reports of joint work on Baltra server AI chips. 

Baltra is the code name for Apple’s new server AI chip designed to support cloud infrastructure, handle heavy artificial intelligence workloads, and strengthen the Apple Intelligence system 

At the same time, experts note that the deal’s impact on Broadcom’s financial results will unfold gradually. While the agreement ensures stable utilization of the company’s manufacturing capacity for several years ahead, details on the supply structure and revenue allocation have not yet been disclosed. Therefore, analysts believe the immediate effect on Broadcom’s revenue in the near term will be limited.

Broadcom’s financial results подтверждают high demand for AI

Investor interest in the company is also supported by its latest financial results. In the second fiscal quarter, Broadcom increased revenue by 48% year over year to $22.18 billion from $15 billion a year earlier. Net profit nearly doubled to $9.31 billion, compared with $4.97 billion a year earlier.

Operating profit was $2.44 per share, beating market expectations. For the current quarter, Broadcom forecasts revenue of about $29.4 billion, which also came in above the analysts’ consensus estimate.

CEO Hock Tan previously said he expects revenue from AI semiconductor sales to grow by more than 200% compared with the same period last year, driven by continued demand for artificial intelligence infrastructure.

Apple strengthens its position in AI

This week, Apple’s market capitalization reached $4.88 trillion. This allowed the company once again to become the world’s most valuable publicly traded company, overtaking Nvidia (NVDA), whose market capitalization at that time had fallen to about $4.86 trillion. 

In addition, Apple is holding preliminary talks with the startup PrismML, which develops large language model compression technologies that make it possible to run powerful AI models directly on the iPhone. If the partnership develops, the company could accelerate the rollout of on-device artificial intelligence across its devices without a significant increase in memory and power requirements.

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