AVGO Stock Falls Premarket: China Reportedly Audits Broadcom’s Grip On State-Backed Data Centers

Chinese authorities are reviewing Broadcom's hardware in state-backed data centres, with potential informal guidance to follow. Broadcom's switches account for up to 90% of equipment in some centres, raising concerns about dependency. The company's China revenue exposure is significant, particularly in its core networking switches segment. Potential domestic alternatives include Huawei, H3C Technologies, and Ruijie Networks.

China is reviewing Broadcom switches in state data centres, with findings suggesting up to 90% usage in some facilities. This aligns with Beijing's push to reduce reliance on foreign tech. Broadcom, Nvidia, and Huawei are major suppliers. Potential beneficiaries include Huawei, H3C, and Ruijie Networks. No formal ban is confirmed, but informal guidance may shift spending to domestic suppliers.

Bernstein analysts maintain bullish views on Nvidia (NVDA) and Broadcom (AVGO), citing strong growth prospects and attractive valuations. They set price targets of $400 for Nvidia (75% upside) and $575 for Broadcom (58% upside). Both companies trade at lower P/E ratios compared to their 5-year averages, suggesting potential cushion against AI sentiment weakness. Nvidia and Broadcom executives also expressed confidence in sustained AI demand.

AMD reached a $1 trillion market cap as shares rose 9.6% to $613.31 on Sept. 21, driven by AI demand. The company is positioning itself as a key competitor to Nvidia in AI infrastructure, with shares up 185% in 2026. AMD's forward earnings multiple is 41, reflecting high growth expectations.

AMD's market cap briefly surpassed $1 trillion after a 29% share price increase over the past month, with a 9% jump on Monday. The company joins a select group of firms with a market cap over $1 trillion, including Nvidia and Broadcom. AMD's milestone comes ahead of Intel, which has seen a 37% share price increase in the past month.

Alphabet (GOOG) is selling its custom-made AI chips (TPUs) to external data centers, competing with Nvidia. Broadcom (AVGO) has a long-term deal with Alphabet to supply TPUs and other components, with revenue expected to increase. GOOG's move may impact AVGO's financials, with estimates suggesting AVGO's revenue could reach $21.7B in the next quarter.